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T-Mobile’s executive team headed to the New York Stock Exchange July 31, to announce, with television cameras waiting for post-call interviews, the throw-a-party level success of their fiscal 2014 second quarter.
EBITA (earnings before interest, taxes, depreciation and amortization) reached $1.45 billion, up 33 percent from the quarter before.
T-Mobile also led the wireless industry in total revenue growth (8 percent year-over-year) and service revenue growth (7.1 percent year-over-year) during the quarter.
It added 1.5 million new customers, making for five consecutive quarters of 1 million-plus quarterly additions. And of those new customers, 579,000 were branded postpaid—a figure that T-Mobile CEO John Legere was quick to point out is “more than the other three [major carriers] combined.”
Even tablets—which T-Mobile began selling not long ago and which got off to a slow start—rallied during the quarter, thanks to offers such as “Operation Tablet Freedom,” which cut hardware pricing and included an offer of free data each month.
“We’ve broken the code on tablets,” said Legere, announcing sales of nearly 329,000 units. (During the fourth quarter of 2013, T-Mobile sold 69,000 tablets to Verizon’s 625,000.)
It has been five quarters since T-Mobile labeled itself the “Un-carrier” and began methodically challenging, and replacing, the industry’s established pillars. Over those five quarters, it has added 7.6 million customers and left its competitors responding to each new call with the loyalty of a gospel choir.
“We’ve been moving straight forward … and the competitors have been responding to our moves for about two or three quarters,” Legere said on the call, when asked about the potential for T-Mobile’s momentum to continue.
“No one needs to wonder what happens when the big guys beat up on the little guy. It’s been happening for two or three quarters,” he continued. “And these are not huge discount programs we’re offering. These are very profitable programs that we can sustain.”
Sprint, announcing its second-quarter results the day before, shared that it had lost 220,000 customers during the quarter—an improvement over the 383,000 the quarter before.
Legere noted that there’s “an assumption” that Sprint’s losses are T-Mobile’s wins, but this is not the case.
“Most of them are former AT&T customers,” said Legere. “That means the size of the opportunity continues to be huge.”
Growing the Brand
Legere was asked repeatedly during the call about the wisdom of attaching itself to a growth-less competitor, when it’s already growing so well organically—comments based on rumors that Sprint and T-Mobile are in merger talks.
“We have never commented on this or any other deal,” said Legere, not naming Sprint specifically.
Still, he continued, “It’s a scale game. … We see a path to be successful as a standalone company … but we could also significantly accelerate that growth [through a merger].”
He offered another hint to the possible rationale of a merger, stating, “Spectrum is extremely important for us.”
T-Mobile purchased spectrum during the quarter (at a fraction of the cost that Verizon recently charged it for some additional spectrum, Legere noted), and it intends to participate in the upcoming incentive auctions, needing to grow its spectrum holdings to match its growing subscriber base.
“We’ve got a good runway,” said Legere.