T-Mobile US, the country’s fourth-largest wireless carrier, outpaced its two biggest competitors in net customer additions this quarter, but it came at a price.
The Bellevue, Wash., company added 2.3 million net customers from July to September, 1.2 million of which were postpaid phone users — considered the most lucrative customers in the telecom industry. That is more than double what the company saw last quarter.
To compare, Verizon said last week that it gained 1.5 million net customers last quarter. Of those, 457,000 were postpaid phone users. AT&T also released its third-quarter earnings last week, and reported 2 million net additions, including 466,000 postpaid phone customers. To attract customers, T-Mobile is touting its “uncarrier” offerings, which range from removing mandatory two-year contracts, to offering unlimited music streaming, to offering wi-fi calling and texting — even while on an airplane.
Since launching the un-carrier brand 18 months ago, T-Mobile has added 10 million customers — bringing its total at the end of the third quarter to 52.9 million.
Kevin Smithen, an analyst with the Macquarie Group, wrote in a research note that T-Mobile’s net gain for the third quarter — a quarter that is usually seasonally weak — shows the power of its brand.
But, its aggressive pricing tactics and customer incentives to gain those customers has hurt the company’s bottom line.
Overall, T-Mobile reported a third-quarter loss of $94 million, or 12 cents a share, compared with a loss of $36 million, or 5 cents a share, in the same quarter a year ago. Its results included recognizing $97 million in costs associated with its merger with MetroPCS in May 2013.
During the second quarter of this year, T-Mobile posted its first profit since merging with MetroPCS. The company ended the second quarter with a profit of $391 million, or 48 cents a share, by recognizing $747 million in revenue from a previous spectrum sale.
While net income and earnings per share are important for T-Mobile to monitor, the company and analysts focused more on customer and revenue growth.
Revenue rose almost 10 percent to $7.35 billion, compared to the same period a year ago, but it missed analysts’ estimates of $7.47 billion.
“While the company exhibited strong revenue and subscriber growth, it was not able to fend off margin pressure in the hypercompetitive wireless carrier sector,” Michael Bowen, an analyst with Pacific Crest Securities, wrote in a research note.
In September, T-Mobile CEO John Legere predicted that T-Mobile would pass its closest competitor, Sprint — the third-largest wireless carrier in the U.S. — by the end of the year. Sprint will release its quarterly earnings next week.
However, Legere said T-Mobile isn’t looking to compete with the low prices the competitor has recently added to the market.
“Most of what we’ve done in the last year is raise prices,” Legere said during a Re/Code Mobile conference Monday night in California. “I’ve never said we are going to be the value leader.”
In fact, T-Mobile’s average billing per customer for the third quarter was $61.59, up 4.2 percent year over year.
For months, Sprint had been interested in acquiring T-Mobile, but in August, the company scrapped its plans to buy T-Mobile for $32 billion when the FCC brought up regulatory concerns similar to those brought up in 2011 when AT&T attempted to buy T-Mobile. Also during the third quarter, Deutsche Telekom, T-Mobile’s majority owner, turned down France-based Iliad’s offer of $15 billion, which the company said was too low. Iliad made a second offer, which it redrew earlier this month.
At the end of the third quarter, T-Mobile had $5.8 billion in cash, which the company has been accumulating to participate in two upcoming spectrum auctions. The first is Nov. 13, and the second has been postponed to 2016.
On Tuesday, T-Mobile shares rose 86 cents, or 3.1 percent, to $28.85.