T-Mobile Reported Another Beat-and-Raise Quarter. The Market Is Unimpressed.

T-Mobile US’ second quarter results Thursday confirmed that the company is on a multiyear path to 5G leadership. Investors will also see greater financial returns as T-Mobile US’s second-quarter results.

Management spoke up, highlighting their competitive position versus other companies, the progress made in the Sprint-merger integration and adding more guidance for subscribers. Wall Street has come to expect T-Mobile to deliver exceptional results: In nine of the last ten quarters, T-Mobile has exceeded consensus earnings estimates.

T-Mobile stock (ticker TMUS), fell 1.8% on Thursday in after-hours trades. It was down 0.3% in regular trading to $144.63, compared with a 0.4% increase for the S&P 500.

T-Mobile reported Thursday night just below $20 billion in second-quarter revenues, an increase of 13% over the previous year and well ahead of Wall Street analysts average forecast of $19.4 trillion. At 78 cents per shared, earnings per share increased nearly eightfold over the pandemic-depressed quarter of 2020. This was compared to the 51-cent consensus. T-Mobile’s adjusted Ebitda, which stands for earnings before interest taxes, depreciation and amortization, was $6.9 Billion, down 1.6% from the previous year, but about $150 M more than estimates. The free cash flow of $1.7billion in the last quarter was $100 million less than consensus.

T-Mobile maintained its momentum in the quarter on the subscriber front. T-Mobile reported that it added a net of 1.3 million wireless customers (meaning people who pay a monthly fee) to its network, which includes 627,000 phones. This is an important metric for wireless companies. These numbers are comparable to Wall Street’s 1.1million postpaid total and 561,000 postpaid telephone consensus estimates.

T-Mobile grew its customer base last year with the acquisition Sprint. It joined rivals AT&T and Verizon Communications (VZ), at the top of the U.S. wireless market. T-Mobile gained tens of million of new customers with the $26 billion deal. Sprint also received its portfolio of wireless spectrum licences, including its valuable mid-band spectrum which is ideal for 5G. A multiyear process of integrating the companies’ networks, operations, and customer bases promises to unlock all kinds of economies of scale and competitive advantages–something T-Mobile executives love to remind investors.

When used in wireless networks, mid-band spectrum allows for a good trade-off between range and capacity. T-Mobile has taken a lead in 5G by using its licenses. T-Mobile’s mid-band network, which T-Mobile calls “Ultra Capacity 5G”, reaches 165m people in the U.S. today. T-Mobile claims that it will reach 200 million people by year end. Its slow, low-band 5G network covers 305 million Americans.

Verizon and AT&T only purchased the majority of their mid-band licenses in the C-Band Auction earlier this year. This spectrum will not be commercially available until the end of the year. In the meantime, independent network rating agencies have ranked T-Mobile’s 5G network higher than its competitors’ in recent tests.

This could explain T-Mobile’s continued subscriber increase, although having lower average prices than its competitors doesn’t hurt. AT&T reported a $54.24 average revenue per account, despite adding 789,000 more postpaid phones during the second quarter. T-Mobile’s ARPU fell 19 cents from Wall Street consensus to $47.61 in the last quarter. (Verizon has added 275,000 postpaid smartphones, but doesn’t report its postpaid phone ARPU. Its total postpaid average revenue per account was $121.24.

On Thursday’s conference call, Mike Sievert, CEO of T-Mobile said that “We are doing exactly what we promised during the merger process,” leading America into 5G and not leaving behind rural areas. “And this leadership is starting to really matter for customers.”

T-Mobile can save money by having one network, store footprints, billing system and corporate office, rather than two. T-Mobile announced Thursday that 80% of traffic from former Sprint customers is now on its network. T-Mobile claimed that it is achieving merger-related cost savings quicker than expected for the second quarter. T-Mobile raised its 2021 synergy guidance to $2.9 billion and $3.2 trillion in 2021 by $100 million.

T-Mobile also stated that they expect to add 5.0m to 5.3m postpaid subscribers this fiscal year. This is an increase from the 4.4 million to the 4.9 million. Management increased 2021 free cash flow guidance to $100 million at the midpoint, and $300 million for capital expenditure guidance.