T-Mobile US Inc. has reported a disappointing fourth quarter, adding fewer wireless subscribers than anticipated by analysts, as competitors ramped up aggressive marketing strategies to attract new customers. As a result, the company’s shares dropped approximately 3.4 per cent in premarket trading on Wednesday.
Competitive Landscape Intensifies
The final quarter of the year typically witnesses heightened promotional activity from telecom operators, particularly around the Black Friday and Cyber Monday shopping events. In a bid to capture consumer interest during this busy period, companies often offer significant discounts on devices and service plans. However, T-Mobile’s performance has been overshadowed by rivals like Verizon, which experienced its most substantial quarterly subscriber gain in six years under new leadership. Verizon’s strategy, which included a deal offering four phone lines for just US$100 per month, has proven successful in attracting new customers.
T-Mobile’s Chief Financial Officer, Peter Osvaldik, acknowledged the fierce competition in the market. “There was heightened device-centric competitiveness from one of our principal competitors, who was trying to get some headline postpaid phone growth,” he stated in an interview with Reuters.
Subscriber Growth Falls Short
In the October to December timeframe, T-Mobile managed to add 962,000 postpaid phone customers, which remains the highest figure among the top three U.S. wireless carriers. However, this number fell short of the 981,330 additions forecasted by analysts surveyed by FactSet. Additionally, T-Mobile’s churn rate—the percentage of customers discontinuing service—rose to 1.02 per cent for postpaid services, compared to 0.92 per cent in the same period last year.
Despite the subscriber growth not meeting expectations, T-Mobile did report total revenue of US$24.33 billion, exceeding analyst estimates of US$24.11 billion according to data from LSEG. The increase in revenue was bolstered by a rise in customers opting for T-Mobile’s premium plans, which include subscriptions to popular services like Netflix and Hulu.
Future Projections and Fiscal Outlook
Looking ahead, T-Mobile has projected an annual adjusted free cash flow between US$18 billion and US$18.70 billion. This forecast falls below the average analyst expectation of US$18.90 billion, as reported by Visible Alpha. The anticipated cash flow has been adversely affected by increased integration costs associated with T-Mobile’s merger with UScellular.
Osvaldik noted the positive trend in customer acquisition for premium plans, stating, “We continue to see new customer accounts… taking our premium plans at 60 per cent take rates.” This reflects T-Mobile’s efforts to enhance its offerings despite the challenges posed by a fiercely competitive market.
Why it Matters
T-Mobile’s underwhelming subscriber additions in the fourth quarter highlight the ongoing challenges within the telecom industry, particularly as competitors employ aggressive pricing strategies to attract customers. The company’s ability to adapt and innovate in response to market pressures will be crucial in maintaining its competitive edge. As the wireless market continues to evolve, understanding these dynamics will be essential for both investors and consumers alike.
