Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- T-Mobile US Inc (TMUS, Financial) achieved its highest ever Q2 postpaid phone net adds in company history.
- The company surpassed a major milestone of 100 million customer connections.
- T-Mobile US Inc (TMUS) swept every category for overall network performance in the latest OpenSignal and nuclear tests.
- The fixed wireless broadband offering captured a record share of industry broadband net adds, reaching 5.6 million customers.
- The acquisition of Metronet and partnership with KKR is expected to expand fiber reach to 6.5 million homes by 2030.
Negative Points
- The acquisition of Mobile and Ultra resulted in a one-time prepaid base adjustment of approximately 3.5 million customers.
- The incorporation of Mint and Ultra resulted in approximately $100 million in net additional service revenue, largely offset by SG&A expenses.
- The company expects a year-over-year impact of $350 million to $450 million due to ACP and funding higher postpaid customer on ACP.
- Cash CapEx is expected to be between $8.7 billion and $9 billion, with long-term expectations in the $9 to $10 billion range annually.
- The company anticipates normal seasonal postpaid phone churn trends in the second half, similar to the previous year.
Q & A Highlights
Q: Can you talk a little bit about the fiber strategy? Should we expect more deals similar to Lumos and Metronet?
A: (G. Michael Sievert, Director) We're excited about our partnerships with KKR to acquire Metronet and Lumos. These transactions give us a significant footprint in the fiber space. While we have a limited appetite for more deals, we are open-minded if the right opportunity arises. Our focus is on executing these current partnerships effectively.
Q: Can you give us more color on the ACP impact and expectations for the second half of the year?
A: (Peter Osvaldik, Senior Vice President - Finance, Chief Accounting Officer) The majority of the ACP impact will be felt in the second half of the year, particularly in Q4. This will primarily affect our wholesale and other service revenues. Despite this, we had a strong quarter in prepaid net adds, partly due to our acquisition of Mint and Ultra.
Q: What contributed to the strength of postpaid phone net adds this quarter?
A: (G. Michael Sievert, Director) We saw significant growth in smaller markets and rural areas, which make up 40% of the U.S. population. We also experienced growth in top 100 markets. Our network expansion and value proposition are attracting prime customers across various segments.
Q: Can you comment on your penetration of mobile wireless subscribers inside your broadband base from fixed wireless?
A: (G. Michael Sievert, Director) The majority of our 5.6 million fixed wireless broadband customers are existing T-Mobile mobile customers. This creates a land-and-expand strategy where we can sell additional wireless services to these customers.
Q: How do you view the long-term trend of ARPU (Average Revenue Per User) and service revenue contribution?
A: (Peter Osvaldik, Senior Vice President - Finance, Chief Accounting Officer) Our strategy is to continue increasing ARPU through customer growth and service expansion. We expect our service revenue to grow as we take more market share and expand our offerings.
Q: What is your strategy behind the recent fixed wireless broadband pricing changes?
A: (G. Michael Sievert, Director) We continuously test different pricing strategies to understand market elasticities. Our general trend is to move back to more normative pricing while ensuring it remains highly attractive to customers.
Q: How do you see the industry volume strength and its sustainability?
A: (G. Michael Sievert, Director) Industry volumes have been strong, but it's hard to predict future trends. Our business plan is adaptable to respond to market opportunities, and we are prepared for potential increases in upgrade rates and switching activity.
Q: Can you describe the mix of your fixed wireless broadband gross adds and how it has shifted?
A: (Peter Osvaldik, Senior Vice President - Finance, Chief Accounting Officer) The majority of our gross adds continue to come from urban and suburban areas, but we are also seeing growth in smaller markets and rural areas. Our fixed wireless product is resonating well across all segments.
Q: How do you manage the capacity for fixed wireless broadband to ensure it doesn't impact mobile subscribers?
A: (G. Michael Sievert, Director) We use a sophisticated model to predict future capacity usage for each sector, considering mobile phone growth and broadband usage. We only approve broadband applications where we are confident the capacity will remain sufficient for years to come.
Q: What are your expectations for postpaid phone churn trends in the second half of the year?
A: (Peter Osvaldik, Senior Vice President - Finance, Chief Accounting Officer) We expect normal seasonal churn trends similar to last year, with a sequential increase from Q2 to Q3 and Q3 to Q4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
