T-Mobile Q3 2022 Earnings Report
Key Takeaways
T-Mobile reported strong Q3 2022 results, leading the industry in postpaid and broadband customer growth and raising 2022 guidance for the third consecutive quarter. The company's differentiated growth strategy and industry-best year-over-year postpaid phone churn improvement drove the highest postpaid service revenue and cash flow growth in the industry.
Postpaid net account additions of 394 thousand, best in industry and highest in company history
Postpaid net customer additions of 1.6 million, more than AT&T and Verizon combined
Service revenues of $15.4 billion grew 4% year-over-year, including industry-leading Postpaid service revenue growth of 7%
Free Cash Flow of $2.1 billion grew 32% year-over-year, best growth in industry and raising guidance
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T-Mobile Revenue by Segment
Forward Guidance
T-Mobile raised its 2022 guidance for postpaid net customer additions, Core Adjusted EBITDA, net cash provided by operating activities, cash purchases of property and equipment, and free cash flow.
Positive Outlook
- Postpaid net customer additions are expected to be between 6.2 million and 6.4 million, an increase from prior guidance of 6.0 million to 6.3 million.
- Core Adjusted EBITDA is expected to be between $26.2 billion and $26.4 billion, an increase from prior guidance of $26.0 billion to $26.3 billion.
- Net cash provided by operating activities is expected to be between $16.3 billion and $16.5 billion, an increase from prior guidance of $16.0 billion to $16.3 billion.
- Cash purchases of property and equipment are expected to be between $13.7 billion to $13.9 billion, an increase from prior guidance of $13.5 billion to $13.7 billion, reflecting T-Mobile’s accelerated build-out of its nationwide 5G network and purchases of High Speed Internet routers.
- Free Cash Flow is expected to be between $7.4 billion and $7.6 billion, an increase from prior guidance of $7.3 billion to $7.6 billion.
Challenges Ahead
- Merger-related costs are expected to be between $4.8 billion and $5.0 billion before taxes, an increase from prior guidance of $4.7 billion to $5.0 billion.
- These costs are excluded from Core Adjusted EBITDA but will impact Net income, Net cash provided from operating activities and Free Cash Flow.
- T-Mobile is not able to forecast Net income on a forward-looking basis without unreasonable efforts due to the high variability and difficulty in predicting certain items that affect GAAP Net income, including, but not limited to, Income tax expense and Interest expense.
- Core Adjusted EBITDA should not be used to predict Net income as the difference between this measure and Net income is variable.
- Free Cash Flow guidance does not assume any material net cash inflows from securitization in 2022.