T-Mobile said it added 962,000 monthly-bill-paying phone customers in the fourth quarter, the most among the three large U.S. wireless carriers. Despite that top-line addition, the result fell short of analysts' expectations of 981,330 net additions.
The October-December period is typically marked by heavy promotional activity around Black Friday and Cyber Monday as carriers push device and plan discounts to capture holiday shopping demand. T-Mobile's finance chief, Peter Osvaldik, said there was "heightened device-centric competitiveness from one of our principal competitors, who was trying to get some headline post-paid phone growth." The company pointed to aggressive offers from rivals as a factor levelling competitive dynamics during the quarter.
Verizon, under new leadership focused on a turnaround, recorded its strongest quarterly wireless subscriber growth in six years in the same period, helped by promotional pricing such as four phone lines for $100 per month.
Churn for T-Mobile's postpaid services rose to 1.02% in the quarter, up from 0.92% a year earlier. At the same time, total revenue came in at $24.33 billion, modestly above consensus estimates of $24.11 billion compiled by LSEG, supported in part by customers migrating to higher-tier plans that bundle streaming subscriptions.
Osvaldik noted ongoing demand for those premium bundles, saying, "We continue to see new customer accounts... taking our premium plans at 60% take rates." The higher mix of premium plans helped revenue despite intensified promotional activity across the industry.
On cash flow, T-Mobile projected full-year adjusted free cash flow in the range of $18 billion to $18.70 billion. That guidance sits below the analyst average expectation of $18.90 billion reported by Visible Alpha. T-Mobile indicated that the free cash flow outlook has been affected by elevated integration costs linked to its merger with UScellular.
Summary
T-Mobile posted healthy absolute postpaid phone additions but missed FactSet-based estimates, experienced a rise in churn, reported revenue slightly above expectations driven by premium plan take-up, and issued annual adjusted free cash flow guidance below analyst averages citing merger-related integration costs.
Key points
- T-Mobile added 962,000 monthly-bill-paying phone customers in Q4, compared with analysts' expectation of 981,330 additions.
- Postpaid churn increased to 1.02% from 0.92% year-on-year; total revenue was $24.33 billion versus $24.11 billion estimated.
- Full-year adjusted free cash flow guidance of $18.00 billion to $18.70 billion is below the $18.90 billion analyst average, with higher integration costs from the UScellular merger cited as a factor.
Risks and uncertainties
- Intense promotional activity from competitors - notably device-centric deals - may pressure subscriber metrics and churn in the near term, affecting wireless sector revenue and customer economics.
- Higher-than-expected integration costs tied to the UScellular merger could continue to weigh on T-Mobile's free cash flow, with implications for capital allocation and investor returns.
- Shifts in plan mix toward premium bundles influence revenue composition, but sustained promotional competition could alter take-up rates and margin dynamics in the telecom sector.