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T-Mobile’s shares fell 2.2% on Thursday’s trading session.
GoranJakus / Dreamstime
T-Mobile US
ended a busy 2020 year, adding more subscribers than its rivals and handily overcoming the broad wireless industry. The self-styled “non-operator” reported better-than-expected earnings and revenues for the fourth quarter on Thursday night, and had previously announced strong subscriber results in early January.
T-Mobile’s shares (ticker: TMUS) fell 2.2% on Thursday’s trading session to around $ 128. Investors came to expect a lot from T-Mobile, and the revenue and profit beats were probably already priced. In addition, the company’s 2021 earnings and subscriber growth orientation were slightly below Wall Street forecasts.
T-Mobile reported 60 cents earnings per share in the fourth quarter, exceeding analysts’ average forecast of 49 percent. But some expected T-Mobile to do even better – estimates were up to 61 cents per share. The result compares to the 87 cents a share that T-Mobile earned before the merger with Sprint in the fourth quarter of 2019.
Revenue stood at $ 20.3 billion, against a consensus forecast of $ 19.9 billion and $ 11.9 billion for stand-alone T-Mobile in the same quarter last year. T-Mobile’s adjusted earnings before interest, taxes, depreciation and amortization – or Ebitda – were $ 6.7 billion, above the Wall Street estimate of $ 6.5 billion. The adjustments include $ 686 million in costs related to the merger.
The fourth-quarter subscriber numbers previously announced by T-Mobile included net adds of 1.6 million postpaid subscribers – wireless customers who receive a monthly bill – while analysts expected about 1.5 million on average. T-Mobile also said it signed 84,000 prepaid subscribers in the last quarter, almost matching the consensus estimate of Wall Street.
For the full year 2020, T-Mobile posted a net profit of $ 3.1 billion – or $ 2.65 per share – and adjusted EBITDA of $ 24.6 billion in $ 50.4 billion in sales. Capital expenditures were $ 11.0 billion and free cash flow was $ 3.0 billion. T-Mobile added 5.5 million postpaid subscribers – including 2.2 million postpaid phones – and about 145,000 prepaid subscribers in 2020.
T-Mobile’s churn rate – the percentage of customers who cancel every month – was 0.9% in 2020 and 1.03% in the fourth quarter.
It was a great quarter for the overall growth of wireless industry subscribers:
ATT
(T) added 1.2 million net postpaid subscribers and
Verizon Communications
(VZ) has signed a network of 703,000. All three operators intensified their promotions before and during the holidays, with many offering huge discounts on
Applein
(AAPL) new iPhones enabled for 5G.
On Thursday’s earnings conference call, T-Mobile CEO Mike Sievert attacked his competitors.
“In a quarter in which Verizon sacrificed growth for profitability and AT&T sacrificed profit growth for customer growth, only T-Mobile showed customer and profit growth, exceeding the consensus in both,” said Sievert. “We are about to take all of your customers.”
T-Mobile sees the good times continuing into 2021, with cost savings and economies of scale with the acquisition of Sprint. The company has already achieved $ 1.3 billion in annual cost savings since the combination was closed in April. CFO Peter Osvaldik said on Thursday that T-Mobile expects to see $ 2.7 billion to $ 3 billion in annual synergies in 2021. This includes savings from combining networks, brand and marketing and reduction budgets administrative and administrative costs.
T-Mobile’s forecast for 2021 presented on Thursday also predicts additions of postpaid customers from 4 million to 4.7 million, capital expenditures from $ 11.7 billion to $ 12.0 billion and cash flow free cash from $ 4.9 billion to $ 5.4 billion. Management also expects to see $ 26.5 billion to $ 27.0 billion in adjusted Ebitda, which excludes about $ 2.5 billion to $ 3.0 billion of costs related to the merger. The pre-call Wall Street consensus estimates included 5.0 million postpaid subscribers and $ 27.1 billion in adjusted Ebitda.
T-Mobile will host an investor day in March, after the results of the C band auction are made public. Wall Street expects management to increase its estimate of cost savings from the acquisition of Sprint and to reveal a new long-term orientation.
This should be the next big catalyst for T-Mobile’s stock, which shot up 60% last year, when Barron’s recommended to buy the shares. It compares to an 18% return, including dividends for the
S&P 500,
and losses of 1% and 18% after dividends for Verizon and AT&T, respectively.
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