T-Mobile talks a lot about being the best at everything, but its first-quarter 2022 postpaid phone net adds placed in the middle of the pack, tallying 589,000. That compares to AT&T’s addition of 691,000 postpaid phone subs and Verizon’s loss of 36,000 during the quarter.
Granted, its net adds were not far behind AT&T and in the grand scheme of things, the “un-carrier” won accolades in a host of other categories. T-Mobile reported the highest postpaid service revenue and cash flow growth in the industry when it reported first-quarter 2022 results on Wednesday.
Besides postpaid net adds, T-Mobile added 62,000 prepaid phone customers during the quarter.
For fixed wireless access (FWA), T-Mobile added 338,000 customers, ending the quarter with 984,000 high-speed internet customers.
Churn at AT&T and Verizon was up in the first quarter of 2022 compared to a year ago, which was not the case at T-Mobile, according to T-Mobile CEO Mike Sievert. Postpaid phone churn at T-Mobile was 0.93%.
“Our churn is unfolding exactly as we told you it would. It’s driven by merger integration synergies and we’ve achieved some really important milestones,” he said.
T-Mobile pointed out that its 5G network now covers 315 million people, or 95% of Americans, across 1.8 square miles. Its super-fast “Ultra Capacity 5G,” which uses 2.5 GHz spectrum, covers 225 million people and nearly 85% of T-Mobile customers. Plans call for bringing the Ultra Capacity 5G to 260 million people this year and 300 million by the end of 2023.
In the FWA space, T-Mobile announced previously that it hit the 1 million mark in terms of FWA customers in early April. It added 338,000 during the first quarter of 2022. That compares to 194,000 that Verizon added, although Verizon’s overall aspirations are quite a bit lower. T-Mobile aims to get 7 million to 8 million FWA subscribers by 2025 while Verizon is gunning for 4 million to 5 million by the end of 2025.
Before today's results were released, analysts at New Street Research weren’t too sure of T-Mobile’s FWA split between the first quarter of 2022 and the month of April.
“We now know that 1Q22 in particular was very strong,” wrote New Street analyst Jonathan Chaplin in a note for investors today. “We believe adds increased sharply in each of February and March, ahead of expectations for 2Q22 (we were at 460k). This was a mile ahead of expectations for 2Q22 when we published it and it suggests increased pressure for cable in 2Q22.”
T-Mobile isn’t throwing large sums of capital at the FWA sector, Sievert noted. Instead, it’s using excess capacity where it’s already built its network for mobility customers. That makes the economics even better for the space, which hasn’t exactly always been a slam dunk for the wireless industry.
Asked about the impact of inflation, Sievert said T-Mobile is somewhat insulated.
“Obviously we need to watch labor costs and variable costs,” but the vast bulk of its cost structure is in long-term contracts such as towers, backhaul and technology that are generally fixed and known over a multi-year period, which “gives us some insulation from inflation effects,” he said.
The larger question will be the effect on consumers, and there’s a lot of anxiety out there. T-Mobile is “famous for being the value leader,” he said, adding that it can save a family of four on postpaid some $900 a year.
“We’ll have to watch” what happens with consumer sentiment, but he suggested that T-Mobile will have a chance to stand up, “as the value leader here.”
ARPU for the win
ARPU is rising, which is something Sievert described as a first in the entire decade that he’s been at the operator. The operator reported postpaid phone ARPU of $48.41.
“It really shows that we can have it both ways. We can have the best value in the industry, remarkable promotions, bring competition to this market like we always have … while simultaneously showcasing the incredible value of our leading 5G network,” he said.
It’s a nice place to be, he added. “We like this market competitive. We know we’re stewards of a healthy and vibrant marketplace,” he said.
As it becomes “less known whether there will be enough room” for existing competitors like Verizon as well as new entrants like Dish, the cable companies that are competing in wireless and more, “it’s very clear that our tailwinds of growth, driven by our rational and well-articulated growth strategy, is a real differentiator for us,” he said.
Investors are looking for growth, but they’re also looking for reliable, safe bets on growth, and “that’s what we strive to achieve quarter after quarter,” Sievert said.
T-Mobile’s strong subscriber result, even in the face of ebbing industry growth, implies that their market share gains have accelerated, said analyst Craig Moffett of MoffettNathanson. “The fact that they have grown ARPU even as industry growth ebbed speaks to their burgeoning network advantage in 5G,” he wrote.
“To be sure, their higher ARPU is not necessarily a sign of higher pricing,” Moffett said. “Mix plays a larger role... Still, their growth stands in sharp contrast to the declines at Verizon and AT&T.”
In fact, he said it’s a rather remarkable development that T-Mobile posted strong ARPU growth. Both AT&T and Verizon posted negative ARPU growth in the first quarter of 2022. “That makes T-Mobile’s ARPU growth – yes, growth! – all the more impressive,” he said.
“Indeed, in our view, it is perhaps the most important part of the Q1 story. It stands in sharp contrast to the declines at AT&T and Verizon.”