Bellevue-based T-Mobile posted better-than-expected subscriber growth in the third quarter, but the shares fell as investors focused on the increasing competition for new customers among the top wireless companies.
T-Mobile, the No. 2 U.S. carrier, added 1 million mobile phone subscribers in the three months ended Sept. 30, the company said in a statement Thursday, easily beating the 852,000 additions that analysts expected. Revenue, however, came in fractionally below estimates.
“By any objective standard, these are very, very good results,” said MoffettNathanson analyst Craig Moffett. “The problem for T-Mobile — and it’s the only problem — is expectations, and therefore T-Mobile’s valuation, makes for a difficult bar to clear.”
The shares fell 3.26% on Thursday, rebounding slightly after a midday low.
T-Mobile is fighting for subscribers with AT&T and Verizon, with all three dangling promotions and incentives to lure new users. But those wins come at a cost, especially after the release of a new iPhone, when carriers are offering free-phone or trade-in promotions at a loss and customers are more apt to switch providers.
T-Mobile’s average revenue per user came in just shy of what Wall Street was expecting on average, according to Bloomberg Intelligence analysts, suggesting promotional pressure weighed on growth. Total revenue rose 8.9% to $21.96 billion.
Apple’ Inc.’s iPhone 17 release in September reflected “a time a lot of subscribers peek their heads up and shop the category,” hunting for better deals than they currently have, Mike Katz, president of marketing, strategy and products, said in an interview.
Excitement over the latest lineup of iPhones has benefitted T-Mobile, Katz said, and the company also absorbed millions of customers from its acquisition of US Cellular, which closed in August, expanding its subscriber base and spectrum holdings across 21 states.
T-Mobile now expects to add as many as 3.3 million wireless subscribers for the year and about 130,000 fiber home internet customers. For the third quarter, earnings were $2.41 per share, topping estimates of $2.38.
Speaking on Bloomberg TV, T-Mobile’s incoming Chief Executive Officer Srini Gopalan suggested the company can continue luring customers with low-priced, high-value plans without denting the bottom line. Other competitors don’t enjoy the same position, he said.
“Incumbents have the existing customers paying a high price,” Gopalan said. “When they try and attract new customers, they have dilution. We don’t have that problem.”
T-Mobile followed overall positive third-quarter results for AT&T, which reported an increase in monthly phone accounts and home internet customers on Wednesday. At the same time, operating revenue fell short of analysts’ estimates. The company said intense competition exists among the Big Three, and sees no sign of that abating. AT&T said its churn rate, or the number of customers who switch to other providers, rose to 0.92%. T-Mobile’s churn rate also rose to 0.89%.
Against that backdrop, Verizon appointed a new CEO on Oct. 6. The biggest of the three mobile carriers, Verizon has been outpaced recently by T-Mobile and AT&T, which have employed marketing and bundling tactics more successfully.
T-Mobile’s results are the last reported under departing CEO Mike Sievert, who is leaving Nov. 1. As Gopalan takes over, he’s expected to steer T-Mobile’s next era with an eye toward expanding its fiber network, including overseeing the incorporation of fiber-optic internet service provider Metronet.
Gopalan told investors and analysts that T-Mobile’s fiber and fixed-wireless home internet offerings are gaining market share. The company will continue investing in both, including “looking at new assets,” he said.
Capital expenditures of $2.6 billion were slightly above Wall Street targets, but Gopalan expressed confidence in T-Mobile’s position.
“We do have strength in the balance sheet. That doesn’t translate into, ‘therefore, let’s go do a bunch of things which don’t make sense from a capital allocation perspective,’” he said. “We’re not going to be any less responsible because we’re strong.”