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T-Mobile stock fell 2.2% on Thursday during out-of-hours trading.
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T-Mobile VS.
ended an eventful 2020 with more subscribers than its rivals and handily outgrowing the wider wireless industry. The self-proclaimed “un-carrier” reported better-than-expected revenues and revenues for the fourth quarter Thursday evening and announced strong subscriber results in early January.
T-Mobile stock (ticker: TMUS) fell 2.2% in out-of-hours trading to around $ 128 on Thursday. Investors expect a lot from T-Mobile, and top- and bottom-line beats were probably already priced in . In addition, the outlook for 2021 earnings and subscriber growth was just below Wall Street forecasts.
T-Mobile reported 60 cents in fourth-quarter earnings per share, which is better than the analyst average forecast of 49 cents. But some expected T-Mobile to do even better – estimates were as high as 61 cents a share. The result is comparable to the 87 cents per share that T-Mobile earned before the Sprint merger in the fourth quarter of 2019.
Revenues were $ 20.3 billion, versus the consensus forecast of $ 19.9 billion and $ 11.9 billion for standalone T-Mobile in the same quarter a year earlier. T-Mobile’s adjusted earnings before interest, tax, depreciation and amortization – or Ebitda – were $ 6.7 billion, higher than Wall Street’s estimate of $ 6.5 billion. Adjustments include $ 686 million in merger-related costs.
T-Mobile’s previously announced fourth-quarter subscriber numbers included net additions of 1.6 million postpaid subscribers – wireless customers who receive a monthly bill – while analysts had expected an average of around 1.5 million. T-Mobile also said it had signed up 84,000 net prepaid subscribers last quarter, roughly on par with Wall Street’s consensus estimate.
For the full year 2020, T-Mobile posted net income of $ 3.1 billion – or $ 2.65 per share – and adjusted Ebitda of $ 24.6 billion on $ 50.4 billion in revenue. Capital expenditures were $ 11.0 billion and free cash flow was $ 3.0 billion. T-Mobile added 5.5 million postpaid subscribers – including 2.2 million postpaid phones – and approximately 145,000 prepaid subscribers in 2020.
T-Mobile’s churn rate – the percentage of customers canceling each month – was 0.9% in 2020 and 1.03% in the fourth quarter.
It has been a big quarter for the overall subscriber growth in the wireless industry:
AT&T
(T) added 1.2 million net postpaid subscribers and
Verizon Communications
(VZ) signed a net 703,000. All three carriers increased their promotions before and during the holidays, and many offered hefty discounts
Apple‘s
(AAPL) New 5G Compatible iPhones.
During Thursday’s earnings call, Mike Sievert, CEO of T-Mobile, took his opponents to the wind.
“In a quarter where Verizon sacrificed growth for profitability and AT&T sacrificed profit growth for customer growth, only T-Mobile delivered customer growth and profit growth, beating consensus on both,” said Sievert. “We are about to acquire all of their customers.”
T-Mobile sees the good times continue in 2021, as the cost savings and economies of scale from the Sprint acquisition begin. Since the close of the combination in April, the company has already achieved $ 1.3 billion in annual cost savings. CFO Peter Osvaldik said Thursday that T-Mobile expects to realize $ 2.7 billion to $ 3 billion in annual synergies by 2021. That includes savings from combining networks, branding and marketing budgets, and reduced administrative and back office costs.
T-Mobile’s forecast for 2021 presented on Thursday also calls for a net increase of 4 million to 4.7 million postpaid customers, capital expenditures from $ 11.7 billion to $ 12.0 billion and free cash flow of $ 4.9 billion up to $ 5.4 billion. Management also expects to see $ 26.5 billion to $ 27.0 billion in adjusted Ebitda, excluding an estimated $ 2.5 billion to $ 3.0 billion in merger-related costs. Wall Street’s consensus estimates include 5.0 million postpaid subscription fees and $ 27.1 billion in adjusted Ebitda before the call.
T-Mobile will host an investor day in March after the results of the C-Band auction are made public. Wall Street expects management to increase their estimate of the cost savings from the Sprint acquisition and reveal new long-term guidelines.
That should be the next major catalyst for T-Mobile’s stock, which is up 60% over the past year Barron’s recommended to buy the shares. It is comparable to a return of 18% including dividends for the
S&P 500,
and 1% and 18% losses after dividends for Verizon and AT&T, respectively.
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