T-Mobile CEO Takes Conservative Approach on Fiber Buys
T-Mobile on Wednesday became the last of the three major wireless carriers to report Q2 results, announcing it added 777,000 net postpaid phone subscribers and 406,000 fixed wireless subscribers. However, it warned of a financial hit of up to $450 million this year from the shuttering of the affordable connectivity program. Meanwhile, CEO Mike Sievert told analysts T-Mobile is “open-minded” but not set on buying additional fiber assets.
Executives were asked repeatedly during an analyst call about future fiber investments. The carrier recently announced it would spend $4.9 billion on a joint venture with investment firm KKR, which will acquire fiber-based provider Metronet (see 2407240020). In April, T-Mobile unveiled a partnership with private equity firm EQT as part of a proposed buy of fiber-to-the-home provider Lumos (see 2404250047).
“Our bias is pure play fiber, the simplicity and elegance of that model,” Sievert said: “It's doing it with partners so that we can get more leverage on our equity dollars.” T-Mobile has “further appetite” for fiber “but not much,” he said: “I want to make that clear.” T-Mobile is open to further investments, but only for the “right deal.”
On ACP, CFO Peter Osvaldik noted that no postpaid customers benefited from the program, which remains a focus on Capitol Hill (see 2407300053). Most ACP customers were served through T-Mobile’s Assurance brand, he said. “The majority of that impact” will be felt in the second half of the year “and even more of it in Q4 than Q3.”
T-Mobile also had 179,000 postpaid net adds, part of which were tied to its Mint and Ultra buys. “Part of that is that we have a fantastic portfolio of brands that meet the needs of value consumers,” Sievert said.
Among other results, T-Mobile reported service revenue of $16.4 billion, up 4% over last year, and postpaid service revenue of $12.9 billion, up 7%. Net income of $2.9 billion was up 32% over the same quarter last year. Postpaid phone churn was a slim 0.80%. Adjusted free cash flow of $4.4 billion was 54% higher than last year.
T-Mobile boasted of its “network breadth, depth and technology leadership” in a release, though spectrum was not a big topic during the analyst call. The carrier noted deploying 600 MHz, 1.9 GHz and 2.5GHz and that 87% of its 5G traffic “is on sites with all three spectrum bands deployed.”
Sievert said he's excited about phone upgrades. “AI is on every customer's mind” and “we're seeing the major companies really pushing ambitiously in the space,” he said: “There was a lot of excitement around Apple's launches.”
MoffettNathanson’s Craig Moffett noted that with a growing focus on convergence, T-Mobile’s two fiber deals would serve just a small percentage of the U.S. population. “We’ve already made abundantly clear how much we dislike T-Mobile’s quixotic mission to cobble together what is destined to be a costly and, ultimately, a largely irrelevant wireline footprint,” Moffett told investors: “It’s a pity that it distracts from real momentum in their core mobility business, which yet again posted strong results. There’s certainly no evidence in Q2 results that T-Mobile ‘needs’ a converged answer. But there’s plenty of evidence that their Lumos and Metronet deals won’t provide one.”