T-Mobile exceeds in Q3, talks broadband strategy

Like its two big rivals AT&T and Verizon, T-Mobile posted mostly better-than-expected results for the third quarter and raised its guidance for the remainder of 2023. The company also offered some additional insights into its ongoing incursion into the market for home Internet services, including how it might expand the strategy using wireless or fiber technologies.

Broadly, the company's results help underscore a rising tide among 5G network operators in recent days. T-Mobile's shares rose by around 2% after it reported its results. AT&T too saw a spike in investor confidence in its business after it reported its own third quarter results last week. And Verizon – which reported its quarterly results earlier this week – enjoyed its best performance in 15 years on Wall Street after it reported solid financials and raised its guidance.

The developments could potentially signal a bottoming in the market, considering 5G providers have generally seen declines in their share prices throughout much of this year.

"Competitive intensity among the big three has eased, cable's pace of gains are starting to level off, and the industry is seeing improved profitability as handset volumes fall," summarized the financial analysts at New Street Research in a note to investors following T-Mobile's report Wednesday.

Related:Verizon tacks on another 384K FWA subs in Q3

Fixed wireless

T-Mobile reported a total of 557,000 new fixed wireless access (FWA) customers, a figure above most analyst expectations and slightly ahead of the company's recent quarterly pace. The gains bring T-Mobile's total FWA customer base to 4.2 million; the company has pledged to raise that total to between 7 and 8 million by 2025.

Verizon, for its part, gained a total of 384,000 FWA subscribers during its own third quarter, bringing its total customer base to 2.67 million. AT&T gained 25,000 FWA customers during the period.

T-Mobile CEO Mike Sievert said his company continues to look at ways to expand its broadband business beyond its 2025 targets. He said the company could do so either through the deployment of additional spectrum, including millimeter wave (mmWave) spectrum, or through partnerships with fiber companies.

"Nothing has changed in terms of our philosophy and approach as it relates to broadband," Sievert said. "We are conducting all kinds of experiments in the space."

He added that "our brand and our team belong in this market." But he said T-Mobile's pursuit of the home broadband market "should be capital light generally off balance sheet." 

In terms of wireless, Sievert said the company plans to add C-band and 3.45GHz spectrum to its network to increase its overall capacity for fixed wireless and other services. But he said the company has not yet come to a conclusion about using its mmWave spectrum holdings for FWA.

Related:AT&T jumps on better-than-expected Q3 results, improved guidance

"We use mmWave pretty strategically in very dense places and so far that's a great use for it," he explained. "But so far we haven't drawn any conclusions that that's a scalable opportunity for us" to use mmWave for fixed wireless.

Verizon, for its part, built much of its early fixed wireless story around mmWave spectrum, but has since expanded mostly with its midband C-band spectrum.

Fiber

As for fiber, Sievert said T-Mobile remains in partnership mode rather than acquisition mode.

Importantly, he said T-Mobile is not the company that is teaming with Jana Partners to pursue a sale of fiber company Frontier Communications. The financial analysts at Wells Fargo previously speculated that T-Mobile was the unnamed "large communications company" partnering with Jana on the effort.

"We're interested in fiber," T-Mobile's Sievert said Wednesday during his company's quarterly conference call. "We don't have an interest right now in changing the basic capital structure of this company nor the philosophy of it, nor the centricity we have around wireless. So, we're looking for ways that we can, over the next couple of years, continue to learn, continue to expand, bring our brand to fiber through partnerships, through capital-light methods, investments, collaborations, those kinds of things. And they won't all be as small as the small pilots we're doing now. We may get after it a little more significantly because our confidence is building in this space."

T-Mobile inked an early fiber pilot in New York City with Pilot Fiber. More recently, T-Mobile expanded its fiber efforts into Colorado by working with Intrepid Fiber, a startup backed by global investment giant Brookfield Infrastructure Partners.

The mobility business

Of course, the bulk of T-Mobile's revenues still come from selling mobile connections to its smartphone customers. In that regard, T-Mobile added 850,000 new postpaid phone customers to its network during the quarter, again leading the industry in that statistic and also exceeding most analyst expectations.

The company also said it now expects to gain a total of between 5.7 million and 5.9 million postpaid net customer additions during the whole of 2023, an upgrade from its prior guidance of 5.6 million to 5.9 million. The company also raised its expectations for earnings for the year.

AT&T and Verizon too both raised their free cash flow expectations for the full-year 2023.

"Results show T-Mobile market share gains are not slowing, EBITDA [earnings before interest, taxes, depreciation and amortization] growth remains in the double digits, and FCF [free cash flow] nearly doubled year over year, allowing T-Mobile to repurchase $2.7 billion worth of shares," wrote the financial analysts at KeyBanc Capital Markets in a note to investors following the release of T-Mobile's quarterly results.

The overall wireless market "turned out to be more resilient than a lot of people predicted," Sievert noted, pointing to predictions that customer growth in the US wireless industry would cool off.

Sievert cited a number of reasons why big 5G network operators continue to report hundreds of thousands of new customers on their networks each quarter: Business customers are signing up for multiple lines of service, prepaid customers are migrating to postpaid plans, and cable companies are adding more customers to their operations.