T-Mobile reported what it described as another record-setting quarter, adding 452,000 branded postpaid phone net additions in the first quarter of 2020 as the company scrambled to close retail stores and arrange work-from-home conditions for the majority of employees.
CEO Mike Sievert on T-Mobile’s earnings call on Wednesday acknowledged right off the bat that it was a “crazy quarter,” with all that was going on. T-Mobile closed its merger with Sprint on April 1 after about two years of fighting for regulatory approvals.
Sievert said the company was one of the first to take bold steps to help mitigate the impacts of COVID-19, with wide-scale temporary company store closures and transitioning employees to work remotely, including 14,000 U.S.-based customer care employees from T-Mobile and Sprint. It enabled virtual retail and introduced curb-side and mobile fulfillment. “Through all this transition, our front-line employees have stepped up big” to support customers, he said.
Right out of the gate, T-Mobile knew its network was going to see increases in demand and changes in usage patterns, so it took action to increase capacity through spectrum loan arrangements and increasing roaming for Sprint customers. “Our network has performed phenomenally,” Sievert said.
The 2.5 GHz spectrum that T-Mobile got with the merger of Sprint is considered a crown jewel, and while the entire integration process will take about three years to complete, the team was able to take advantage of the extended merger approval process to get moving on a lot of site leasing and permitting ahead of time. The new T-Mobile controls 319 MHz of combined low-band and mid-band spectrum nationwide, which is nearly double that of AT&T and nearly triple that of Verizon, Sievert said.
Hard times hit
T-Mobile was “killing it” in January and February and then things came to a pretty fast stop in March. The company was quicker to execute slowdowns and shutdowns of its retail stores in March, according to the CEO.
“We felt it was very important to be decisive,” Sievert said. The company is based in the Seattle area, where the coronavirus struck particularly hard early on and that might have spurred it to act faster than others.
CFO Braxon Carter said that for the second quarter, T-Mobile expects postpaid net customer additions between zero and 150,000, reflecting the impact of COVID-19, including retail store closures and lower gross customer additions.
Total branded postpaid net additions were 777,000 in the first quarter. Prepaid net losses were 128,000, yielding 649,000 total branded net adds for the quarter.
Adjusted EBITDA hit an all-time record high of $3.7 billion, up 12% year-over-year despite the environment created by COVID-19. Free cash flow, excluding payments for merger-related costs, was $893 million, up 37% year-over-year.
Sievert reiterated that the T-Mobile and Sprint brands will unify this summer under one name, but he wasn’t any more specific about a date for the switch.