The News: T-Mobile (NASDAQ: TMUS) reported second quarter 2023 results, raising 2023 guidance. Service revenues of $15.7 billion grew 3% year-over-year (YoY), including postpaid service revenue of $12.1 billion, which grew 5% YoY. Read the T-Mobile earnings press release here.
T-Mobile Q2 2023: Breakthrough Growth in Customers and Profitability
Analyst Take: T-Mobile’s Q2 2023 results were highlighted by its breakthrough postpaid account and customer net additions as well as record-low postpaid phone churn, which provided the basis for the company to claim industry-leading service revenue and postpaid service revenue. Key fiscal Q2 2023 highlights included:
Claims Industry-Leading Growth in Postpaid and Broadband Customer Categories
- Postpaid net account additions of 299,000, enabling T-Mobile to claim best in industry
- Postpaid net customer additions of 1.6 million, enabling T-Mobile to claim best in industry and raising guidance
- Postpaid phone net customer additions of 760,000, enabling T-Mobile to claim best in industry and best Q2 in 8 years
- Postpaid phone churn of 0.77%, enabling T-Mobile to report best in industry for the first time ever and a record low
- High Speed Internet net customer additions of 509,000, more than AT&T, Verizon, Comcast, and Charter combined for the fifth consecutive quarter
T-Mobile Spotlights Differentiated Profitable Growth Strategy, Driving Industry-Leading Financial Performance
- Service revenues of $15.7 billion grew 3% YoY and Postpaid service revenues of $12.1 billion grew 5% YoY, with T-Mobile positioning both as best in industry growth
- Net income of $2.2 billion grew $2.3 billion YoY and diluted earnings per share (EPS) of $1.86 grew $1.95 YoY, best in industry growth claimed
- Core Adjusted EBITDA of $7.3 billion grew 11% YoY, best in industry growth claimed and raising guidance
- Net cash provided by operating activities of $4.4 billion grew 3% YoY, raising guidance
- Adjusted Free Cash Flow of $2.9 billion grew 64% YoY
- Repurchased 25.2 million shares of common stock in Q2 2023 for $3.5 billion
T-Mobile Highlights as Nationwide Overall Network Leader and Multiple 5G Network Awards
- Clean sweep across every category for overall network performance for the third quarter in a row from Ookla, along with continued wins across multiple overall network and 5G categories from Opensignal and umlaut
- 5G network covers 98% of Americans and Ultra-Capacity 5G covers 285 million people
We are encouraged by T-Mobile’s Q2 2023 results and overall market momentum across the mobile ecosystem. T-Mobile continues to forge ahead in setting the pace for the mobile network industry as the company registered breakthrough performances throughout the major mobile network provider categories such as postpaid net account additions, postpaid net customer additions, and broadband net customer additions as well as the lowest postpaid phone churn. T-Mobile delivered remarkable gains across key metrics including YoY service revenues, YoY postpaid service revenues, YoY net income, YoY net cash, and adjusted free cash flow.
Moreover, in June 2023, T-Mobile and Google Cloud unveiled they are collaborating to combine the power of 5G and edge compute, giving enterprises more ways to embrace digital transformation. T-Mobile will connect the 5G ANS suite of public, private, and hybrid 5G networks with Google Distributed Cloud Edge (GDC Edge) to help customers adopt emerging 5G applications and use cases such as digital twins and AR/VR experiences.
From our view, GDC Edge customers across multiple industries can now use T-Mobile’s 5G ANS with more ease to get the low latency, high speeds, and reliability they will need for any use case that requires data-intensive computing processes such as AR or computer vision.
Also, we see the recent rollout of 5G carrier aggregation capabilities can allow T-Mobile to combine multiple 5G channels (or carriers) to deliver greater speed and performance. Now T-Mobile can merge four 5G channels of sub-6 GHz spectrum – two channels of 2.5 GHz Ultra Capacity 5G, one channel of 1900 MHz, and one channel of 600 MHz spectrum. Customers with the Samsung Galaxy S23 smartphone are targeted to be the first to experience four-carrier aggregation, with more devices to follow.
T-Mobile Q2 2023 Takeaway: T-Mobile Raising 2023 Guidance Following Strong Q2 2023 Performance
T-Mobile is raising its 2023 outlook powered by continued customer growth and merger synergies. Key 2023 guidance highlights include:
- Postpaid net customer additions are expected to be between 5.6 million and 5.9 million, an increase from prior guidance of 5.3 million to 5.7 million.
- Core adjusted EBITDA, which is adjusted EBITDA less lease revenues, is expected to be between $28.9 billion and $29.2 billion, an increase from prior guidance of $28.8 billion to $29.2 billion.
- Merger synergies are expected to be approximately $7.5 billion, an increase from prior guidance of $7.3 billion to $7.5 billion.
- Merger-related costs are expected to be approximately $1.0 billion before taxes. These costs are excluded from core adjusted EBITDA but will impact net income, net cash provided by operating activities, and adjusted free cash flow.
- Net cash provided by operating activities, including payments for merger-related costs, is expected to be between $18.0 billion and $18.3 billion, an increase from prior guidance of $17.9 billion to $18.3 billion.
- Cash purchases of property and equipment, including capitalized interest, are expected to be between $9.5 billion and $9.7 billion, an increase from the prior guidance of $9.4 billion to $9.7 billion.
- Adjusted free cash flow, including payments for merger-related costs, is expected to be between $13.2 billion and $13.6 billion. Adjusted free cash flow guidance does not assume any material net cash inflows from securitization.
We find that T-Mobile for Business is becoming an increasingly important asset for advancing T-Mobile’s strategic vision and growth objectives. As such, we advocate that T-Mobile should consider highlighting T-Mobile for Business activities in its quarterly financial releases, ultimately culminating in the breakout of separate T-Mobile for Business revenues when the unit fulfills revenue targets that can warrant such an approach.
We believe the ongoing implementation of 5G carrier aggregation capabilities, in alignment with VoNR support, reinforces T-Mobile’s ability to differentiate through its delivery of 5G Standalone (SA) offering, which we view as the only nationwide 5G SA network in the U.S.
Overall, we expect T-Mobile to achieve its raised 2023 guidance as the company is consistently outperforming its key rivals across the most important mobile network service categories, including financial, technical, and customer attraction and retention. Once again T-Mobile is showing the entire mobile industry why it is the service provider pacesetter by executing relentlessly on its portfolio development and market vision.
Daniel Newman and his co-host of The Six Five Webcast, Patrick Moorhead of Moor Insights and Strategy discussed T-Mobile’s earnings in their latest episode. Check it out here and be sure to subscribe to The Six Five Webcast so you never miss an episode.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
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Author Information
Ron is an experienced, customer-focused research expert and analyst, with over 20 years of experience in the digital and IT transformation markets, working with businesses to drive consistent revenue and sales growth.
Ron holds a Master of Arts in Public Policy from University of Nevada — Las Vegas and a Bachelor of Arts in political science/government from William and Mary.
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
