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  (Source: T-Mobile USA)
Carrier adds 1.65 million net wireless customers for the quarter, loses $20M USD

T-Mobile USA, America's fourth largest carrier announced its Q4 2013 earnings on Tuesday.

I. T-Mobile Continues to be Most Affordable in Industry

The 67 percent Deutsche Telekom AG (ETR:DTE) owned cell phone service provider was closely scrutinized, after beating market leader Verizon Wireless (now a wholly owned subsidiary of Verizon Communications Inc. (VZ)) for two straight quarters in Q2 and Q3 2013.

Verizon posted impressive gains for the quarter, adding 1.653 million total subscribers (1.573 million postpaid, 80k prepaid) to reach 102.799 million (92.6 million postpaid) customers.  AT&T Inc. (T) added 809,000 phone customers (566,000 postpaid, 243,000 prepaid), 440,000 tablet cellular customers, and 398,000 connected device customers, to reach 110.4 million wireless subscribers (72.6 million postpaid).  Even Sprint Corp. (S) looked vigorous, with 682,000 net adds (58,000 net postpaid adds, 158,000 net prepaid adds, and 466,000 net tablet adds).

The good news for T-Mobile for the quarter was that it gained 1.6 million net customers for the quarter -- in a virtual tie with Verizon.  In total T-Mobile gained 981,000 branded subscribers -- better than AT&T or Sprint easily -- including 800,000 postpaid phone customers, 112,000 prepaid phone customers, and 69,000 mobile broadband (tablet) customers.

T-Mobile USA
T-Mobile USA continued to grow fast in customers in Q4, tying Verizon for the most quarterly growth. [Image Source: T-Mobile via iMore]

And it its revenue rose 39.1 percent to reach $6.83B USD.  That figure misssed an analyst average expectation of $6.94B USD compiled by Bloomberg.  The average revenue per user (ARPU) was $50.70 USD for the quarter, down 2.9 percent from a month ago, and missing analyst hopes of $51.06 USD.  To put that number in context, Verizon's industry-leading ARPU was $157.21 USD. 

That means the average customer pays a third as much on T-Mobile as on Verizon.  That's good news for customers, but not so good news for T-Mobile's earnings.

The affordable contracts came at a cost.  The carrier lost $20M USD in Q4 2013, up from $8M USD a year before.  The cost of its accelerating LTE deployment led to a 13.2 percent increase in capital expenditures, reaching $4.2B USD.  T-Mobile announced with its earnings that it expects this could increase up to 9.5 percent more, coming in at $4.3-4.6B USD this year.  That's still small compared to Sprint's planned spending of $8B USD and AT&T's $21B USD capital budget for this year.

II. Aggressive Spending, More Growth in Store for 2014

For the year of 2013 T-Mobile USA had 4.4 million net adds (on a pro forma basis), including 2.4 million net adds.  Its JUMP! iniative remains the most affordable and popular early-upgrade program in the industry, ending the quarter with 3.6 million customers.
T-Mobile Jump

For the year revenue grew 5.3 percent to reach $26.1B USD.  T-Mobile lost money in the lost three quarters of the year ($16M, $36M, and $20M USD) respectively, which offset a Q1 gain of $107M USD.  For the year, T-Mobile had a narrow net profit of $35M USD.  But with programs such as its recently announced up to $350 USD in incentives to pay the early termination fees (ETFs) of customers quitting other carriers, it seems likely that T-Mobile may face a net loss for its 2014 fiscal year.

That's not necessarily a bad thing.  If it continues to add customers, it will eventually make money analysts believe.  Comments Chief Financial Officer Braxton Carter:

Our business is a business that has acquisition costs of customers.  If we had not grown during 2013 you would have seen a massive increase in the profitability, in the Ebitda and the net income of our business.

T-Mobile expects its decline in user revenue and losses to stabilize in H2 2014.

John Legere
John Legere, T-Mobile USA CEO (center, pink/white shirt), with fellow executives.

Craig Moffett, a principal analyst at MoffettNathanson LLC in New York, comments:

T-Mobile is making money on each subscriber they acquire -- it’s just nowhere near as much money as the incumbents are used to.  The rest of the industry should be very afraid.

In other words even amidst talk of potential acquisitions and falling share values, T-Mobile is accomplishing exactly what rebellious CEO John Legere wants -- growing fast and shaking up its market rivals.

Sources: T-Mobile USA, Bloomberg

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By mchentz on 2/26/2014 12:46:29 AM , Rating: 2
I really like T-Mobile but thier coverage was my issue so I went to Verizon also

RE: Yep
By retrospooty on 2/26/2014 7:09:03 AM , Rating: 2
Yup, but its totally regional and depends on where you go. If you live and work in an area where T-Mo comes in good, then its a great deal. If you don't, or often go to places where the reception isn't great, its kind of pointless.

RE: Yep
By BRB29 on 2/26/2014 8:26:55 AM , Rating: 2
I can attest that VZ does indeed have better coverage. However, I can also assure you that Tmobile's network is vastly improved, though still not to VZ's level.

For basically playing 20-60% less a month, I don't mind going into a deadzone 2% of the time. For the average joe's personal phone line, it is more than good enough.

Sprint is crap and customer service is terrible as usual. ATT's pricing is whacked and on par with VZ. ATT's network definitely isn't as good as VZ.

With Tmobile, you trade a small amount of coverage for huge savings. With ATT and Sprint, there's not much pros and more cons. For VZ, you get the best but pay the most.

RE: Yep
By Reclaimer77 on 2/26/2014 8:53:09 AM , Rating: 2
Don't forget the free WiFi calling, which works awesome.

Even with Verizon, my signal is poor in my home. Wish I had WiFi calling.

RE: Yep
By therealnickdanger on 2/26/2014 9:18:08 AM , Rating: 2
Wi-Fi calling FTW. When I had Sprint, they were kind enough to provide me with a femtocell tower for free due to the zero reception we get in our house, but it was buggy and constantly had to be reset.

I switched from Sprint (I've been a customer since 1996!) to T-Mobile when the S3 came out. Sprint kept upping their rates and reducing services and were going out of their way to force old-timers like me upgrade to new services. "Oh no, that data is not data, this is data... and it's $50 extra per month." Yeah, **** that noise.

T-Mobile has been up front, honest, inexpensive, fast, and reliable. We're on a family plan with two friends and we all get 2GB@4G, unlimited throttled data, unlimited voice/text, free wi-fi calling/texting (works on GoGo In-Flight, too!) all for $119/mo total.

RE: Yep
By EasyC on 2/26/2014 9:21:50 AM , Rating: 2
I'm a huge proponent of wifi calling. Saves battery, is seamless to the user, and I don't really go a lot of places that don't have wifi.

It's nice being able to vacation to the mountains somewhere at an inn with wifi calling and still have phone service if necessary. My buddies on VZ get to play the wander down the valley game until 1 bar hopefully pops up.

RE: Yep
By therealnickdanger on 2/26/2014 9:49:35 AM , Rating: 2
I was recently in Mexico at a mountain resort with no service to speak of... except Wi-Fi. Who needs an international plan? Free calls and texts home to the U.S., no problem.

RE: Yep
By mike8675309 on 2/26/2014 11:38:12 AM , Rating: 2
Note though WIFI calling only works on certain phones. It does not work on the IPhone nor the Nexus 5. Most phones you would bring yourself won't work with wifi calling either.

That said, works fine with the G4 and my mom's LG phone.

RE: Yep
By EasyC on 2/26/2014 11:46:07 AM , Rating: 2
It's only on T-Mobile branded phones, where they control the software. Obviously the Nexus/Moto X/iPhone aren't controlled by T-Mobile, so it wouldn't include that.

Hopefully as T-Mobile gains in popularity, that will translate into the hacker community. I'd love the folks over @ XDA to port the native wifi calling to custom roms for unlocked phones.

RE: Yep
By bankerdude on 2/26/2014 11:26:45 PM , Rating: 2
Not true. From personal experience I know It works great on the Note 3, the HTC One, the LG Optimus L9 and even the Galaxy S2. In fact it works on almost all non-apple phones with stock roms including Blackberry and Windows phone. Once again, our "friends" at apple making sure we either pay too much for a feature that comes standard everywhere else, or just don't get it at all.

Sounds about right
By Omega215D on 2/25/2014 11:15:23 PM , Rating: 2
T-Mobile was the first carrier I signed with when I started my first job back in high school. It was affordable and had pretty decent phones compared to Verizon back in those days.

10 years later I now have a job and hobbies that require traveling to somewhat remote places so coverage is a huge factor and I had to sign with Verizon (AT&T and Sprint didn't cut it despite their maps) and for the most part I do get what I pay for. The same goes for T-Mobile. Their coverage was lacking but when you consider the price, well, then it really isn't.

RE: Sounds about right
By Samus on 2/26/2014 12:47:23 AM , Rating: 2
It's funny how that works in communications. You get the best satisfaction at the lowest price (where expectations are low and exceeded) and the highest price (where expectations are high and met.)

Everything in the middle just results in pissed off customers. And that's the AT&T and Sprint market.

The only exception is if you get Sprint for sub-T-mobile prices through an MVNO (Virgin, Ting, etc) where price is low (where expectations are low, but again, exceeded.)

RE: Sounds about right
By spamreader1 on 2/26/2014 10:28:54 AM , Rating: 2
My only real problem with ATT is thier data packages, and general customer service.

Though I whole hartedly admit thier customer service has improved dramatically over the last 3-4 years, it's still lacking in many ways. Gone are the days of going to the local ATT store and waiting 4 hours to talk to a rep, average wait time here is more like 15 minutes.

RE: Sounds about right
By pandemonium on 2/28/2014 7:06:22 AM , Rating: 2
Been with AT&T for 11 years. Have unlimited data and have had nothing but what I'd have to say is excellent customer service from them. The way I have unlimited data isn't advertised directly, but it is available to new customers if they look for it.

Their online account management system is pretty keen, online chat assist is pretty lacking in actual support (they almost always can't directly help you and have to pass it along or give you a number to call), but their phone support is stellar from the 5 times I've had to actually speak to them.

AT&T just lacks in coverage, since Verizon owns a lot of the cellular coverage in certain areas around the country. That's my only real beef with them, and it doesn't bother me that much since they're usually in very small towns or very remote locations that I'll just be passing through.

Times are changing
By Mr772 on 2/26/2014 8:38:41 AM , Rating: 2
If T-Mobile continues to grow they will be able to expand their coverage which would be a win for everyone. The 700mhz spectrum they recently added will help them reach farther and provide increased coverage. Verizon and AT&T have already lowered their prices because of T-Mobile! Free markets and competition are a wonderful thing! I am a Verizon customer but I hate them because of their greed and contempt for their customers. The reason T-Mobile is thriving is because of the over priced service of the competition. In essence Verizon and AT&T's price gouging and collusion created the success of T-Mobile, fitting.

RE: Times are changing
By lagomorpha on 2/26/2014 9:18:54 AM , Rating: 2
I am a Verizon customer but I hate them because of their greed and contempt for their customers.

When I ported my number to T-Mobile I asked Verizon if I could continue my contract with another number because I wanted to experiment with T-Mobile's coverage in my area until I committed to switching. It took their 3rd level support to tell me that porting my number automatically closed my account and billed me the termination fee and I would have to sign a completely new contract if I wanted to continue service (HA!).

Worked out in the end, T-Mobile gives me better coverage in my area for 1/4 the price. I don't think Verizon will be happy until they are rid of all their customers.

RE: Times are changing
By PCR on 2/26/2014 9:32:33 AM , Rating: 2
I had been a Verizon customer for 10+ years, my bill kept going up every few years. It really started hurting when they got rid of their unlimited data and introduced their "Share Everything" plan. That plan was absolutely horrid and over priced, mind you I never went over my data allotment and never paid any overage charges. Yet I still found that the "Share Everything" was quite expensive for my 3 lines and Verizon pretty much had started price gouging their customers.

I knew then, that as soon as the opportunity presented itself I was going to jump ship. When I saw T-mobile advertize their ETF reimbursement, I immediately ported all 3 lines to T-Mo. My bill is way lower than what I paid at Verizon and have had zero service issues with T-Mo. Good riddance Verizon and thank you T-mo for intruding some competition into the market.

RE: Times are changing
By pandemonium on 2/28/2014 7:17:42 AM , Rating: 2
I'm curious to see how T-Mobile growing would be a win for everyone, since they'll obviously have to increase their prices to compete with the other big players.

Every small carrier is significantly cheaper in their plan costs. That's just the way it is.

Interesting stats
By HammerZ on 2/26/2014 11:48:16 AM , Rating: 2
If every carrier is growing, where are the additions coming from? Just kind of curious...

Also, I can't even begin to imagine how anyone would have a ARPU of $157 for Vz. Wow...Maybe it accounts for several products/offers, not just mobile phone plans?

RE: Interesting stats
By spamreader1 on 2/26/2014 2:23:09 PM , Rating: 2
Boomers kids.

Gotta spend money to make money
By chmilz on 2/26/2014 3:20:04 PM , Rating: 2
This will pay off huge for T-Mobile over the next 5 years.

"A politician stumbles over himself... Then they pick it out. They edit it. He runs the clip, and then he makes a funny face, and the whole audience has a Pavlovian response." -- Joe Scarborough on John Stewart over Jim Cramer

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