T-Mobile says it will gain 2M-3M customers in 2018, but analysts expect more

T-Mobile reported quarterly results largely in line with analyst expectations, and the company ended 2017 with an overall net gain of 5.7 million customers. However, T-Mobile said it expects to roughly cut that number in half next year.

“In 2018, we expect postpaid net customer additions between 2.0 and 3.0 million,” the carrier wrote in its earnings release.

But, T-Mobile CFO Braxton Carter noted, that figure may change considering the company historically has exceeded its annual subscriber targets.

“As we perform during the year, we will adjust this guidance as we demonstrate the growth that we’re showing,” he said during the company’s quarterly conference call with investors. “This guidance also shows our desire to balance growth with profitability. The lower switcher volumes we have seen in recent quarter, and our pursuit of growth adjacency, which we will expect will afford us the opportunity to be less promotional in existing markets.”

Wall Street analysts generally viewed T-Mobile’s 2018 customer expectations as a low bar the company may well surpass.

“We believe this guidance range may prove conservative, given TMUS' track record of beating and raising this range in recent years,” wrote the analysts at Deutsche Bank Markets Research in a note to investors issued this morning. “For context, TMUS added +3.6mn postpaid subscribers in 2017, after initially guiding to +2.4-3.4mn on 4Q16 earnings.”

Others agreed. “We [expect] a similar trend of beating and raising throughout the year in 2018, suggesting results may end up roughly in-line with current expectations,” the analysts at New Street Research wrote in a note to investors this morning.

As for where T-Mobile’s new customers will come from in 2018, the company said it’s working to open several new growth avenues. Specifically, company executives said T-Mobile would expand the geographic reach of its networkto 325 million people across 2.5 million square miles by the end of 2018and would also work to target new demographics like those 55 and older with specific promotions.

One other major growth opportunity is the enterprise market, according to T-Mobile’s John Legere. “This is one of the significant growth areas of the company,” he said, noting that T-Mobile’s share of the enterprise market is only 2-3%.

“2018 will be our best year yet,” Legere added. “We’re incredibly confident in our future.”

T-Mobile covered a range of topics in conjunction with the release of its earnings:

Customers: T-Mobile added 891,000 branded postpaid phone net customers during the fourth quarter of 2017, up from the 595,000 it added in the previous quarter but down slightly from the 933,000 it acquired in the year-ago quarter. The carrier’s branded prepaid net customer additions clocked in at 149,000, a figure down from the previous quarter and the year-ago quarter. T-Mobile ended 2017 with 72.6 million total customers.

Churn: T-Mobile’s branded postpaid phone churn was a fourth-quarter record of 1.18%, down from the 1.23% it reported in the third quarter and slower than the 1.28% it reported in the year-ago quarter.

5G: T-Mobile’s CTO Neville Ray said the carrier plans to deploy some of its millimeter wave spectrum this year for 5G, and will offer 5G-capable smartphones by the first half of next year.

Small cells: T-Mobile said it is embarking on a “significant” small cell program. The company said it plans to roll out 25,000 small cells in 2018 and early 2019. “This is on top of the approximately 18,000 small cells and DAS nodes already rolled out as of the end of 2017,” the company said.

Taxes: As a result of the government’s new tax reform legislation, “we do not expect to be a material cash tax payer until 2024, compared to 2020 previously. We expect a positive impact on net cash taxes paid of $6.5 to $7.0 billion from 2020 to 2027. Additionally, we do not anticipate any permanent interest expense disallowance in the future,” the company said.

ARPU: T-Mobile’s branded postpaid phone ARPU was $46.38 in the quarter, a figure that’s a decline from the company’s ARPU in the previous quarter and the year-ago quarter.

M&A: “Nothing is off the table,” explained CEO Legere, adding that AT&T’s stalled effort to acquire Time Warner appears to have stifled wider M&A activity in the telecom industry. “I think the AT&T/Time Warner surprise extension kind of put everything on hold for a while, but my belief is that there is a huge, pent-up bubble of logical things that need to happen for customers to be served,” Legere said. “It’s not a matter of if, it’s a matter of when.”

He said all possible combinations are being considered, including a merger with Sprint or Dish Network or cable companies. “I think it’s actually accelerating behind the scenes,” he said of the industry’s interest in M&A.

Cable competition: Legere was questioned about whether Comcast’s Xfinity Mobile MVNO and other wireless offerings from cable providers were a concern for T-Mobile. “The furthest thing from my mind is any impact from cable,” he said. “I don’t see any impact to us at all.” Click here for more on this story.

Financials: T-Mobile reported total revenues of $10.76 billion in the period, up 7.4% from the third quarter and 5.1% from the fourth quarter of the prior year. The company’s net income clocked in at $2.71 billion, up significantly from prior periods.