The FINANCIAL -- T-Mobile US, Inc. on February 17 reported fourth quarter and full-year 2015 results which show continued customer momentum driving strong financial growth.
For the full year 2015, T-Mobile added 8.3 million total net customers and outperformed the industry once again by delivering 11% growth in service revenue and 31% growth in Adjusted EBITDA. T-Mobile’s growth has been fueled by the performance of its nationwide 4G LTE network, which now covers 305 million Americans and continues to be the fastest in the nation, according to T-Mobile.
“T-Mobile is #1 in postpaid phone growth, #1 in service revenue growth, #1 in Adjusted EBITDA growth, not to mention #1 in customer care and #1 in network speed,” said John Legere, President and CEO of T-Mobile. “We set out to change this industry, we’re well on our way and we won’t stop.”
Industry-Leading Customer Growth in 2015
In the fourth quarter of 2015, T-Mobile added 2.1 million net customers, bringing its total customer count to more than 63 million at year-end 2015. This was the eleventh consecutive quarter that the Company has generated more than 1 million net customer additions and the third consecutive quarter with more than 2 million net customer additions. Full-year 2015 also marked the second consecutive year that the Company added more than 8 million net customers, which once again outperformed the wireless industry.
T-Mobile also saw ongoing strength in branded postpaid customers with net additions of 1.3 million in the fourth quarter of 2015. This was the sixth consecutive quarter in which the Company has reported more than 1 million branded postpaid net customer additions. Branded postpaid phone net customer additions were 917,000 in the fourth quarter of 2015, bringing the total branded postpaid phone net customer additions to approximately 10 million since the launch of the Un-carrier. For full-year 2015, the Company added 4.5 million branded postpaid net customer additions, well above the revised guidance for branded postpaid net customer additions of 3.8 to 4.2 million provided in connection with the third quarter of 2015 earnings.
Branded prepaid net customer additions in the fourth quarter of 2015 were 469,000. For full-year 2015, the Company added 1.3 million branded prepaid net customer additions.
Wholesale net customer additions were 301,000 in the fourth quarter of 2015 and 2.4 million for full-year 2015.
Branded postpaid phone churn was 1.46% in the fourth quarter of 2015, down 27 basis points from the fourth quarter of 2014, marking the best year-over-year churn improvement in 2015. Sequentially, churn was stable instead of the typical seasonal increase. Branded prepaid churn was 4.20% in the fourth quarter of 2015, compared to 5.39% in the fourth quarter of 2014.
Total devices sold or leased were 10.8 million units in the fourth quarter of 2015, including 10.0 million smartphones.
Strong Financial Performance
In addition to strong customer growth, T-Mobile delivered outstanding financial results as it outperformed the industry in service revenue and Adjusted EBITDA growth in 2015.
Service revenues for the fourth quarter of 2015 grew by an industry-leading 11.7% year-over-year, primarily due to rapid growth in the Company’s customer base. T-Mobile’s total revenues for the fourth quarter of 2015 grew by 1.1% year-over-year. The year-over-year change in total revenues was impacted by lower equipment revenues, which declined by 29.5% year-over-year primarily due to the mix shift to the JUMP! On Demand program. Under the JUMP! On Demand program, equipment revenues associated with leased devices are recognized over the lease term rather than when the device is delivered to the customer, resulting in lower equipment revenues for the quarter. Full-year 2015 service revenues increased by 10.9% year-over-year, and total revenues increased by 8.4% year-over-year.
Branded postpaid phone Average Revenue per User (ARPU) of $48.05 in the fourth quarter of 2015 was generally stable sequentially as continued strategic focus on family plan penetration and promotional activity was offset by higher data attach rates. Year-over-year, branded postpaid phone ARPU declined by 0.4%. Branded postpaid Average Billings per User (ABPU) was a record $63.74 in the fourth quarter of 2015, up 3.1% year-over-year primarily due to growth in total EIP billings and lease revenues on a per user basis. Lines per account grew to 2.54 in the fourth quarter of 2015, up from 2.36 in the fourth quarter of 2014.
T-Mobile grew Adjusted EBITDA by 30.2% year-over-year for the fourth quarter of 2015 to $2.3 billion. The increase was primarily due to higher service revenues from growth in the customer base, MetroPCS synergies, focused cost control, and decreased losses on equipment sales primarily driven by the impact of customers shifting to leasing devices with JUMP! On Demand, partially offset by higher selling, general and administrative expenses due to customer growth. The Company expanded its Adjusted EBITDA margin to 35% for the fourth quarter of 2015, up from 30% in the fourth quarter of 2014. Adjusted EBITDA in the fourth quarter of 2015 benefited from a gain of $139 million related to a spectrum license transaction. For full-year 2015, Adjusted EBITDA grew by 31.2% to $7.4 billion.
The aggregate impact from leasing and Data Stash on Adjusted EBITDA in the fourth quarter of 2015 was $246 million, including lease revenues of $194 million and the non-cash net impact from Data Stash of $52 million. For full-year 2015, the aggregate impact was $158 million, including lease revenues of $224 million, partially offset by the net impact from Data Stash of $66 million.
Net income amounted to $297 million, up from $138 million in the third quarter of 2015 and $101 million in the fourth quarter of 2014. For the full-year 2015, net income was $733 million compared to $247 million in 2014. Earnings per share (EPS) in the fourth quarter of 2015 was $0.34, more than double the EPS of $0.15 in the third quarter of 2015 and almost triple the EPS of $0.12 in the fourth quarter of 2014. For the full-year 2015, EPS was $0.82 compared to $0.30 in 2014.
Net cash provided by operating activities was $2.2 billion in the fourth quarter of 2015, up from $1.4 billion in the fourth quarter of 2014. For full-year 2015, net cash provided by operating activities was $5.4 billion compared to $4.1 billion in 2014. Free cash flow was $802 million in the fourth quarter of 2015, up from $56 million in the fourth quarter of 2014. For full-year 2015, free cash flow was $690 million compared to a loss of $171 million in 2014. Free cash flow in the fourth quarter of 2015 included net cash proceeds of $795 million related to sales of certain EIP receivables beginning in November 2015. Adjusted free cash flow, which excludes decommissioning payments related to the one-time shutdown of the CDMA portion of the MetroPCS network, was $897 million in the fourth quarter of 2015 and $1.0 billion for full-year 2015.
Expansion of America’s Fastest 4G LTE Network Fuels Growth
T-Mobile delivered on several major network milestones in 2015. The Company more than doubled its geographic 4G LTE footprint during the year, expanding its reach to 305 million Americans, and exceeding its stated goal of 300 million.
T-Mobile is rapidly deploying both Wideband LTE to add capacity to America’s Fastest LTE Network and Extended Range LTE to enhance coverage and in-building performance. Extended Range LTE, which operates on the Company’s low-band 700 MHz A-Block spectrum, currently covers approximately 190 million people in more than 300 market areas. In February 2016, T-Mobile entered into agreements with multiple parties to acquire additional 700 MHz A-Block spectrum covering approximately 48 million POPs. These acquisitions will increase T-Mobile’s total low-band spectrum holdings from 210 million POPs to 258 million POPs upon closing.
Cash capital expenditures reflect T-Mobile’s continued investment in the expansion of its 4G LTE network. In the fourth quarter of 2015, cash capital expenditures were $1.4 billion, up from $1.1 billion in the third quarter of 2015 and $1.3 billion in the fourth quarter of 2014. For the full-year 2015, cash capital expenditures were $4.7 billion compared to $4.3 billion in 2014, of which $246 million was capitalized interest for full-year 2015 compared to $65 million in 2014.
100% of the MetroPCS spectrum has been re-farmed and integrated into the T-Mobile network. Total decommissioning costs for the CDMA network shutdowns amounted to $21 million in the fourth quarter of 2015, down compared to the $193 million in the third quarter of 2015.
Highest Ranking in Customer Care
J.D. Power again recognized T-Mobile for its Customer Care performance, awarding the Company the highest ranking among full service wireless providers in the J.D. Power 2016 Wireless Customer Care Full Service Study – Volume 1. The award marks the second time in a row T-Mobile has been recognized, further demonstrating the Company’s track record as an organization with a strong focus and commitment to providing an outstanding customer experience whether you call in, come in to the store, or access online.
2016 Outlook Guidance
T-Mobile expects to drive further customer momentum while delivering strong growth in Adjusted EBITDA and free cash flow in 2016.
With the success of its Simple Choice plan, network investment, and the continued evolution of the Un-carrier strategy, branded postpaid net customer additions for 2016 are expected to be between 2.4 and 3.4 million.
For the full-year 2016, T-Mobile expects Adjusted EBITDA to be in the range of $9.1 to $9.7 billion. This guidance includes the aggregate impact from leasing and Data Stash of approximately $0.7 to $1.0 billion.
Cash capital expenditures for 2016 are expected to be in the range of $4.5 to $4.8 billion.