The News: T-Mobile (NASDAQ: TMUS) reported fourth quarter (Q4) and full year (FY) 2022 results, delivering breakthrough postpaid service revenue and cash flow growth in 2022 and began shareholder returns earlier than planned. T-Mobile also registered its lowest ever annual postpaid phone churn along record high postpaid account, postpaid customer, and broadband customer growth in 2022. Read the T-Mobile Press Release here.

T-Mobile Q4 2022 & FY 2022: Smashing Milestones and Competition

Analyst Take:  T-Mobile’s Q4 2022 and FY 2022 results were highlighted by its record postpaid account and customer net adds, which provided the basis for the company to claim industry-leading postpaid service revenue and cash flow growth. Additional key Q4 2022 and FY 2022 highlights included:

Industry-Leading Growth in Postpaid and Broadband Customer Claims

• Postpaid net account additions of 314 thousand in Q4 2022 – 1.4 million in 2022, record high
• Postpaid net customer additions of 1.8 million – 6.4 million in 2022, exceeded guidance
• Postpaid phone net customer additions of 927 thousand in Q4 2022 – 3.1 million in 2022, provides claim to only operator with YoY growth
• Postpaid phone churn of 0.92% in Q4 2022, record low, only operator to improve
• High Speed Internet net customer additions of 524 thousand in Q4 2022 – 2.0 million in 2022, industry-best claimed

T-Mobile Touts Differentiated Growth Model Unlocks Strong Financial Results and Accelerates Shareholder Returns in 2022

• Service revenues of $15.5 billion in Q4 2022 – $61.3 billion in 2022, record high
• Postpaid service revenues of $11.7 billion in Q4 2022 — $45.9 billion in 2022, industry-leading growth of 8%
• Net income of $1.5 billion in Q4 2022 — $2.6 billion in 2022, which included merger-related costs, decreased 14%
• Core Adjusted EBITDA of $6.6 billion in Q4 2022 — $26.4 billion in 2022, industry-leading growth of 12% and at high end of guidance
• Net cash provided by operating activities of $4.3 billion in Q4 2022 — $16.8 billion in 2022, industry-leading growth of 21%, exceeded guidance
• Free Cash Flow of $2.2 billion in Q4 2022 — $7.7 billion in 2022, industry-leading growth of 36%, exceeded guidance
• Repurchased 21.4 million shares of common stock in 2022 for $3.0 billion

Independent Third-Party Experts Crown T-Mobile the New Overall Network Leader While Extending 5G Lead

• T-Mobile’s overall network performance swept the competition for the first time according to Ookla

Doing Good — The Un-carrier Way — Ranked Top 20 on America’s Most JUST Companies in 2023

• Committed to net-zero target by 2040, first in US wireless industry, and signed The Climate Pledge
• Project 10Million connected more than 5.3 million students, more than halfway toward achieving its goal

Strong 2023 Outlook Driven by Continued Profitable Customer Growth and Merger Synergies

• Core Adjusted EBITDA is expected to grow 10% at mid-point
• Net cash provided by operating activities is expected to grow 8% at mid-point and Free Cash Flow is expected to grow approximately 75% at mid-point

We are encouraged that T-Mobile demonstrated integration progress of Sprint assets laying the foundation to approach full run-rate merger synergies in 2023. T-Mobile attained this important milestone by significantly completing the network decommissioning in Q3 2022, less than 2.5 years post-merger closing, and more than a year ahead of the original merger plan. T-Mobile looks to substantially complete its integration by the end of 2023.

T-Mobile realized approximately $6.0 billion in merger synergies in 2022, with $2.5 billion of selling, general, and administrative (SG&A) expense reductions and $2.2 billion of cost of services reductions, which increased cash flows while funding growth initiatives and network build, and $1.3 billion in avoided network build costs.

The company incurred merger-related costs of $592 million in Q4 2022 and $5.0 billion in 2022. Net of taxes, merger-related costs were $444 million, or $0.36 per share, in Q4 2022 and $3.7 billion, or $2.97 per share, in 2022. Cash payments for merger-related costs were $622 million in Q4 2022 and $3.4 billion in 2022.

Keeping an Eye on 5G Core, T-Mobile for Business, and Security

We believe T-Mobile for Business is becoming an increasingly important asset for T-Mobile overall. In 2022, the unit formed partnerships with high-profile businesses targeted including nine out of the top ten airlines, BMW Group, Battle Motors (Crane Carrier), VINFAST, Formula 1, SailGP, and Lucid Drone Technologies, Inc.

From our view, the collaboration of T-Mobile and Cisco, announced in December 2022, to deliver a distributed cloud native core gateway across T-Mobile’s nationwide network provides further validation for T-Mobile’s 5G network. T-Mobile is transitioning all its 5G and 4G traffic to the new converged core, with the goal of boosting performance for customers with faster speeds, lowering latency, and improving responsiveness.

Moreover, T-Mobile is using the new core gateway to swiftly test and accelerate time to market for new 5G and IoT applications at scale, including network slicing and Voice over New Radio (VoNR). The automated converged core gateway streamlines operations, enabling T-Mobile to shift resources with increased agility to help drive new services such as 5G Home Internet.

We also find T-Mobile’s cybersecurity investments in 2022 as integral to mollifying ecosystem concerns about protecting its network. During the Q4 2022 earnings call, T-Mobile CEO Mike Sievert noted that after identifying a criminal attempt to access the company’s data, T-Mobile shut it down within 24 hours while its systems and policies protected the most sensitive kinds of customer data from being accessed. T-Mobile has committed $150 million in data security and cybersecurity technology in 2022 and 2023 as part of a $500 million class-action lawsuit settlement reached in summer 2022.

T-Mobile Q4 2022 and FY 2022 Takeaway: Robust 2023 Outlook

T-Mobile is anticipating a robust 2023 outlook that is powered by continued customer growth and merger synergies. Key 2023 Outlook highlights include:

• Postpaid net customer additions are expected to be between 5.0 million and 5.5 million, expected to lead the industry for the ninth consecutive year.
• Core Adjusted EBITDA, which is Adjusted EBITDA less lease revenues, is expected to be between $28.7 billion and $29.2 billion, up 10% year-over-year at the mid-point.
• Merger synergies are expected to be between $7.2 billion and $7.5 billion, including $2.5 billion to $2.7 billion of SG&A expense reductions, $3.1 billion to $3.2 billion of cost-of-service expense reductions and approximately $1.6 billion in avoided network build costs.
• 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 Free Cash Flow.
• Net cash provided by operating activities, including payments for Merger-related costs, is expected to be between $17.8 billion and $18.3 billion, up 8% YoY at the mid-point.
• Cash purchases of property and equipment, including capitalized interest, are expected to be between $9.4 billion and $9.7 billion.
• Free Cash Flow, including payments for Merger-related costs, is expected to be between $13.1 billion and $13.6 billion, up approximately 75% YoY at the mid-point. Free Cash Flow guidance does not assume any material net cash inflows from securitization.

Overall, we see T-Mobile’s Q4 2022 and FY 2022 attainment of its highest ever postpaid account net additions, as well as postpaid and broadband growth that continue to outflank Verizon and AT&T, provides the warrant for its robust 2023 outlook. Factor in T-Mobile for Business’s substantial revenue upside and we find that T-Mobile is solidly positioned to meet new competitive challenges, as well as sufficiently handle any macroeconomic uncertainties that may arise on the horizon.

Disclosure: Futurum Research 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 Futurum Research as a whole.

Other insights from Futurum Research:

T-Mobile and Cisco Show Why a Distributed Nationwide Cloud Native 5G Core Gateway is Sexy

T-Mobile Q3 2022 Results Show Overall Steadiness as T-Mobile for Business Ramps Up

T-Mobile Launches Advanced Industry Solutions to Facilitate and Empower Smart Retail, Cities, Manufacturing, and Logistics Businesses

Image Credit: TipRanks

Author Information

Ron Westfall

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.