10-QPeriod: Q2 FY2015

T-Mobile US, Inc. Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 30, 2015For Securities:TMUSTMUSZTMUSITMUSL

Summary

T-Mobile US, Inc. (TMUS) reported its second-quarter 2015 financial results, showing continued revenue growth driven by its "Un-carrier" strategy. Total revenues for the six months ended June 30, 2015, increased by 13% to $16.0 billion year-over-year. This growth was primarily fueled by an increase in branded postpaid and prepaid service revenues, reflecting successful customer acquisition and retention initiatives, particularly the "Un-carrier" value propositions. The company continues to invest heavily in network modernization and spectrum acquisition. Capital expenditures for property and equipment reached $2.2 billion for the first half of 2015, with a full-year projection of $4.4 billion to $4.7 billion. T-Mobile also secured additional AWS spectrum licenses for $1.8 billion in early 2015. Despite increased operating expenses related to customer growth and network expansion, Adjusted EBITDA saw a significant increase of 26% for the first six months of 2015, reaching $3.2 billion. However, Free Cash Flow was negative at $(0.523) billion due to substantial capital investments.

Financial Highlights

52 data points
Beta

Revenue

$8.18B

67.5% Gross Margin

Net Income

$361.00M

4.4% Net Margin

EPS (Diluted)

$0.42

Total Assets

$57.19B

Cash & Equivalents

$2.64B

Free Cash Flow

-$30.00M

Financial Statements
Beta
Revenue$8.18B
Cost of Revenue$2.66B
Gross Profit$5.52B
SG&A Expenses$2.44B
Operating Expenses$7.58B
Operating Income$597.00M
Interest Expense$257.00M
Net Income$361.00M
EPS (Basic)$0.43
EPS (Diluted)$0.42
Shares Outstanding (Basic)811.61M
Shares Outstanding (Diluted)821.12M

Key Highlights

  • 1Total revenues grew 13% to $16.0 billion for the first six months of 2015, compared to $14.1 billion in the prior year period, driven by strong performance in branded postpaid and prepaid services.
  • 2Branded postpaid service revenues increased 13% to $7.8 billion for the six months ended June 30, 2015, supported by an increase in average customers and successful "Un-carrier" initiatives.
  • 3Adjusted EBITDA increased by 26% to $3.2 billion for the six months ended June 30, 2015, indicating improved operational efficiency and profitability.
  • 4Capital expenditures for property and equipment were $2.2 billion in the first half of 2015, with the company projecting $4.4 billion to $4.7 billion for the full year, underscoring significant investment in network modernization.
  • 5T-Mobile secured approximately 97 million people-pop coverage AWS spectrum licenses for $1.8 billion in January 2015, enhancing its spectrum portfolio.
  • 6Branded postpaid phone churn improved to 1.31% for the six months ended June 30, 2015, down from 1.47% in the prior year, indicating better customer retention.
  • 7Free Cash Flow was negative at $(0.523) billion for the six months ended June 30, 2015, primarily due to substantial investments in property and equipment for network upgrades.

Frequently Asked Questions

Revenue growth was primarily driven by increases in branded postpaid and prepaid service revenues. This was attributed to strong customer acquisition and retention stemming from T-Mobile's "Un-carrier" initiatives and attractive family rate plan promotions, as well as increased device sales financed through Equipment Installment Plans (EIPs).

T-Mobile is making substantial investments in network modernization and spectrum acquisition. Capital expenditures for property and equipment were $2.2 billion in the first half of 2015, with $1.8 billion spent on new AWS spectrum licenses. While these investments are crucial for future growth and competitiveness, they have resulted in negative Free Cash Flow of $(0.523) billion for the six months ended June 30, 2015.

Yes, the company saw improvements in customer retention, particularly with branded postpaid phone churn decreasing to 1.31% for the six months ended June 30, 2015, from 1.47% in the same period of the prior year. This indicates that T-Mobile's strategies are effectively retaining its core customer base.

The report indicates strong revenue and Adjusted EBITDA growth, driven by customer additions and the success of the "Un-carrier" strategy. However, significant ongoing investments in network infrastructure and spectrum are impacting Free Cash Flow negatively in the short term. Management expects continued growth, supported by these strategic investments.