T-Mobile falls as competition hits revenue growth

By Geoffrey Smith

Investing.com -- Shares in T-Mobile US (TMUS) fell in premarket trading on Wednesday after the cellular network carrier's quarterly update fell short of expectations, showing signs of increased competition for subscribers in 5G.

T-Mobile, the U.S.'s second-biggest wireless operator since its merger with Sprint, said revenue fell 2.5% from a year earlier to $20.27 billion, some 2% below market consensus, despite adding substantially to its subscriber base in the year. As such, it joined rivals AT&T (T) and Verizon (VZ) in posting lackluster numbers for the quarter that were marked by an intensifying fight to win customers as disposable incomes were squeezed by high inflation in the second half of last year.

Diluted earnings per share over the whole of 2022 were down 15% from 2021's levels at $2.06, despite a rebound in the fourth quarter to $1.08.

T-Mobile gained a net 927,000 new post-paid phone subscribers in the fourth quarter and 3.1 million over the year as a whole. It expects this growth to accelerate next year, adding between 5M and 5.5M new customers on a net basis.

The company was still upbeat about its prospects for the coming year, forecasting core adjusted earnings before interest taxes, depreciation and amortization to grow around 10% to just under $30B, and free cash flow to grow 75% to around $13.35B.

In part that's down to the realization of efficiency gains from the merger, which T-Mobile estimates at as much as $7.5B this year (up from $6B last year).

A third of that represents reductions in selling, general and administrative costs, while another $1.6B comes from rationalizing network investment costs. Merger-related costs, meanwhile, are expected to be much less, at $1B before taxes.