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Is the best strategy for a wireless carrier actually an un-carrier approach? If T-Mobile's better-than-expected third quarter 2013 earnings report is any indication, acting less like a traditional wireless provider might be the best way for wireless companies to behave.
T-Mobile reported more than 1 million net customer additions in the third quarter of 2013, a figure that includes 648,000 total net subscribers for the quarter. (Prepaid customer additions and wholesale customer additions are among the categories that helped T-Mobile hit the overall 1 million mark.)
This comes in under Verizon's 927,000 third quarter net subscriber growth but handily beats
These results can largely be attributed to T-Mobile's recent eschewment of traditional wireless contracts: on March 26, 2013, the company abolished the annual contract with its "Simple Choice" service plan; in July, it announced that it would let customers upgrade their phone when they want, and not when they're told; and in October, it announced it would provide unlimited data and texting for customers in more than 100 countries.
“T-Mobile’s Un-carrier approach is resonating with consumers," said T-Mobile CEO John Legere in a statement Tuesday morning, "because we are fixing the things that drive customers crazy.” Legere attributed part of the growth to T-Mobile's MetroPCS acquisition, which added 1.5 million customers into the T-Mobile network.
Financially, these results helped translate into third quarter revenue growth of 7.4% over the second quarter of 2013: third quarter revenue was $6.7 billion versus the second quarter's $6.2 billion and $4.9 billion in the third quarter of 2012. This is also ahead of Street expectations of $6.6 billion in third quarter revenue. Adjusted EBITDA was $1.344 billion, up 6.2% over the second quarter of 2013.
Average revenue per user (ARPU) for post-paid customers was$52.20, down from $53.60 in the second quarter of 2013 and $56.59 in the third quarter of 2012. It was also below consensus estimates of $52.78.
T-Mobile reaffirmed its previous full-year 2013 guidance, saying that adjusted EBITDA on a pro-forma basis will be in the range of $5.2 to $5.4 billion. CFO Braxton Carter noted in the company's earnings call that they are maintaining this range -- the same they announced in the second quarter's earnings call -- despite faster than expected customer growth. Cash capital expenditures are expected to be in the range of $4.2 to $4.4 billion on a pro forma combined basis, which also remains unchanged from previous guidance.
Following the company's earnings release, shares of T-Mobile surged in pre-market trading, at one point trading more than 5% higher than Monday's $28.34 close. The stock opened at $29.22 Tuesday morning and was enjoying a 1.3% bump in early trading activity. Meanwhile, AT&T was down 0.6%, Verizon was down 1% and Sprint was down over 0.5% in early Tuesday action. Year-to-date, T-Mobile is the clear winner of the group, posting a 46% gain compared to single-digit growth from AT&T and growth in the mid-teens for Sprint and Verizon.
