T-Mobile Announces Q3 Results

T-Mobile Press Release| November 5, 2020

T-Mobile Crosses 100 Million Total Customer Milestone and Raises Second Half 2020 Financial Guidance Across the Board with Strong Third Quarter 2020 Results

Nov 05, 2020

BELLEVUE, Wash.–(BUSINESS WIRE)– T-Mobile US, Inc. (NASDAQ: TMUS):

Industry-Leading Customer Growth

• Record-high 2,035,000 total net additions, best in industry
• Record-high 1,979,000 postpaid net additions, best in industry
• 689,000 postpaid phone net additions, best in industry
• 56,000 prepaid net additions
• Record-high 100.4 million total customers at the end of Q3 2020

Strong Financial Results Drive Guidance Raise Across the Board

• Total revenues of $19.3 billion and service revenues of $14.1 billion
• Net income⁽¹⁾ of $1.3 billion and diluted earnings per share (“EPS”) of $1.00
• Adjusted EBITDA⁽¹⁾ of $7.1 billion, raising H2 2020 guidance
• Net cash provided by operating activities of $2.8 billion, raising H2 2020 guidance
• Free Cash Flow⁽¹⁾ of $352 million, raising H2 2020 guidance

Delivering Merger Synergies Faster Than Expected

• Expect to deliver more than $1.2 billion of synergies in 2020
• 15 percent of Sprint postpaid customer traffic has already been moved over to the T-Mobile network and customer network migrations have begun

Extending 5G Network Leadership

• America’s largest 5G network covering 270 million people with more geographic coverage than Verizon and AT&T combined
• Supercharged experience with mid-band (2.5 GHz) 5G network covering more than 30 million people and expect to cover 100 million people by the end of 2020

T-Mobile US, Inc. (NASDAQ: TMUS) reported third quarter results today, highlighted by crossing the 100 million customer milestone after reporting record-high postpaid net additions that were nearly as much as the rest of the industry combined. T-Mobile, the undisputed growth leader in wireless, delivered industry-best results in total customer net additions, postpaid net additions, and postpaid phone net additions while simultaneously delivering net income and adjusted EBITDA growth. With these strong results, the company is raising its second half 2020 guidance for profitability and cash flow.

Since closing its merger with Sprint seven months ago, T-Mobile has been driving hard on integration including unifying employees and customers under one brand, rapidly improving the Sprint customer experience, and quickly rolling out 2.5 GHz spectrum to build the world’s best 5G network. Merger synergies are being realized faster than expected and the company expects to deliver more than $1.2 billion of synergies in 2020.

“Last quarter T-Mobile overtook AT&T to become #2 in U.S. wireless and today we announced our highest ever postpaid net adds. Now, with over 100 million wireless customers and America’s largest 5G network, there is no doubt that we’re the growth leader in wireless,” said Mike Sievert, T-Mobile CEO. “Customers are choosing T-Mobile in record numbers because we are the only ones that can deliver this combination of value and experience with a true 5G network that is available to customers in every single state! We’re consistently and profitably outpacing the competition – and we’re just getting started!”

(1)		Adjusted EBITDA and Free Cash Flow are non-GAAP financial measures. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. Reconciliations for these non-GAAP financial measures to the most directly comparable financial measures are provided in the Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures tables. We are not able to forecast Net income on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect GAAP Net income including, but not limited to, Income tax expense, stock-based compensation expense and Interest expense. Adjusted EBITDA should not be used to predict Net income as the difference between the two measures is variable.

Industry-Leading Customer Growth

• Net customer additions were 2,035,000 in Q3 2020, a record-high and the 23^rd consecutive quarter of industry-leading performance in this category. The total customer count increased to a record-high of 100.4 million.
• Postpaid net customer additions were 1,979,000 in Q3 2020, a record-high and the 11^th consecutive quarter of industry-leading performance in this category.
• Postpaid phone net customer additions were 689,000 in Q3 2020, leading the industry and marking the 27^th consecutive quarter of leading the national carriers. Postpaid phone churn was 0.90%.
• Postpaid other net customer additions were 1,290,000 in Q3 2020, leading the industry and nearly double Verizon and AT&T combined as T-Mobile for Business continued to connect educational institutions during COVID-19.
• Prepaid net customer additions were 56,000 in Q3 2020 and prepaid churn was 2.86%.

The following table reflects the combined company results of T-Mobile for Q3 2020 and Q2 2020, while prior periods represent the historical results of standalone T-Mobile prior to the Sprint merger.

Strong Financial Results

• Total service revenues increased year-over-year to $14.1 billion in Q3 2020, driven by the Sprint merger and continued customer growth.
• Total revenues increased year-over-year to $19.3 billion in Q3 2020, driven by the Sprint merger and continued customer growth.
• Net income increased year-over-year to $1.3 billion in Q3 2020, as revenue growth outpaced expense increases. Merger-related costs were $288 million pre-tax and $208 million, net of tax, in Q3 2020.
• EPS was relatively flat year-over-year at $1.00 in Q3 2020, as growth in net income was offset by a higher number of outstanding shares as a result of the Sprint merger.
• Adjusted EBITDA increased year-over-year to $7.1 billion in Q3 2020 primarily due to the Sprint merger and continued customer growth.
• Net cash provided by operating activities increased year-over-year to $2.8 billion in Q3 2020.
• Cash purchases of property and equipment including capitalized interest increased year-over-year to $3.2 billion in Q3 2020, as the company accelerated the build-out of its nationwide 5G network and ramped network integration activities related to the Sprint merger.
• Free Cash Flow decreased year-over-year to $352 million in Q3 2020.

The following table reflects the combined company results of T-Mobile for Q3 2020 and Q2 2020, while prior periods represent the historical results of standalone T-Mobile prior to the Sprint merger.

(in millions, except EPS)		Quarter		Nine Months Ended September 30,		Q3 2020 vs. Q2 2020		Q3 2020 vs. Q3 2019		YTD 2020 vs. YTD 2019
	Q3 2020		Q2 2020		Q3 2019		2020		2019
Total service revenues		$	14,139		$	13,230		$	8,713		$	36,215		$	25,650		6.9	%		62.3	%		41.2	%
Total revenues			19,272			17,671			11,061			48,056			33,120		9.1	%		74.2	%		45.1	%
Net income			1,253			110			870			2,314			2,717		1,039.1	%		44.0	%		(14.8	)%
EPS			1.00			0.09			1.01			2.06			3.15		1,011.1	%		(1.0	)%		(34.6	)%
Adjusted EBITDA			7,129			7,017			3,396			17,811			10,141		1.6	%		109.9	%		75.6	%
Net cash provided by operating activities			2,772			777			1,748			5,166			5,287		256.8	%		58.6	%		(2.3	)%
Cash purchases of property and equipment, including capitalized interest			3,217			2,257			1,514			7,227			5,234		42.5	%		112.5	%		38.1	%
Free Cash Flow, excluding gross payments for the settlement of interest rate swaps			352			1,441			1,134			2,525			2,921		(75.6	)%		(69.0	)%		(13.6	)%

Delivering Merger Synergies Faster Than Expected

T-Mobile remains highly confident in its ability to deliver $43 billion of synergies and achieve the $6 billion of annualized savings from the Sprint merger from a combination of cost avoidance and expense reductions. In fact, the company is delivering faster than expected and targeting more than $1.2 billion of synergies in 2020.

• Expect more than $600 million of network synergies primarily from avoided new site builds and early site decommissioning.
• Expect approximately $500 million of sales, service and marketing synergies primarily from accelerated rationalization of retail stores, marketing consolidation and organizational redesign.
• Expect approximately $100 million of back office synergies primarily from accelerated organizational redesign.

The network team is quickly adding capacity to the T-Mobile network to facilitate more Sprint customer traffic. 15 percent of Sprint postpaid customer traffic has already been moved over to the T-Mobile network and customer network migrations have begun, as the company enabled cross-provisioning last month, thus separating the network migration from the billing system migration and enabling gross additions and upgrades from Sprint customers to be activated on the T-Mobile network.

Extending 5G Network Leadership

T-Mobile is on a mission to build America’s best 5G network, offering all of the Un-carrier customers unrivalled coverage and capacity in every place that they live, work and play. The company has already been the first to launch a nationwide 5G network, first to launch standalone 5G, and first to have 5G coverage in all 50 states and Puerto Rico.

• America’s largest 5G network covers 270 million people in 8,300 cities and towns across 1.4 million square miles. That’s more square miles of 5G coverage than Verizon and AT&T combined – 3.5x more than Verizon and 2x more than AT&T.
• T-Mobile continued to leverage its network to expand into new complementary 5G business opportunities like broadband and video to grow revenue per household.
  • Expanded its Home Internet Pilot service to parts of 450 cities and towns, laying the groundwork for a nationwide 5G commercial launch of fixed wireless broadband.
  • Launched its latest Un-carrier move with the introduction of next-gen streaming services TVision LIVE, VIBE and CHANNELS, and the TVision HUB, a new streaming device.

Raising H2 2020 Outlook

• Postpaid phone net customer additions are expected to be between 1.3 million and 1.4 million, including 600,000 to 700,000 in Q4 2020. The prior guidance of 1.7 million to 1.9 million total postpaid net customer additions was achieved with Q3 2020 results.
• Adjusted EBITDA is expected to be in the range of $13.6 billion to $13.7 billion, up from prior guidance of $12.4 billion to $12.7 billion. The Adjusted EBITDA target includes leasing revenues of $2.5 billion to $2.6 billion, compared to prior guidance of $2.4 billion to $2.6 billion.
• Cash purchases of property and equipment, including capitalized interest are expected to be between $6.7 billion and $6.9 billion, compared to prior guidance of $6.5 billion to $6.9 billion.
• Merger-related costs are expected to be $800 million to $1 billion before taxes, unchanged from prior guidance. These costs are excluded from Adjusted EBITDA but will impact Net income and cash flows.
• Net cash provided by operating activities, including payments for Merger-related costs, is expected to be in the range of $5.9 billion to $6.1 billion, up from prior guidance of $5.3 billion to $5.7 billion.
• Free Cash Flow, including payments for Merger-related costs, is expected to be in the range of $700 million to $900 million, up from prior guidance of $300 million to $500 million. Free Cash Flow guidance does not assume any material net cash inflows from securitization.

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