uploads///Telecom T Mobiles Revenue

How Much Can T-Mobile’s Revenue Grow in 1Q16?

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Apr. 19 2016, Updated 12:07 p.m. ET

T-Mobile’s revenue in 1Q16

In the previous part of this series, we learned that Wall Street expects T-Mobile’s (TMUS) adjusted EPS (earnings per share) to grow significantly YoY (year-over-year) in 1Q16. Wall Street also anticipates a modest YoY growth in the wireless carrier’s revenue during the quarter. According to consensus Wall Street estimates, T-Mobile’s revenue is expected to increase ~8.4% YoY to reach ~$8.4 billion in 1Q16.

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Consensus versus actual performance

As you can observe in the above chart, the consensus revenue estimates by analysts for T-Mobile were conservative in 4Q15, 2Q15, and 1Q15. However, in 3Q15, the consensus revenue estimate was higher than the actual figure reported by the carrier.

T-Mobile’s revenue in 4Q15

T-Mobile’s revenue increased marginally by ~1.1% YoY to reach ~$8.2 billion in 4Q15. The carrier’s postpaid and prepaid segments continued to drive growth in the service revenue. For mobile players T-Mobile, Sprint (S), Verizon (VZ), and AT&T (T), service revenues are the core stable streams. T-Mobile’s service revenue rose by ~11.7% YoY to reach ~$6.6 billion during 4Q15.

Meanwhile, the YoY decline in the carrier’s equipment revenues increased to ~29.5% in 4Q15 from ~9.3% in 3Q15. In 4Q15, T-Mobile’s equipment revenue was ~$1.5 billion. According to the company, the adoption of its leasing plan—Jump! On Demand—was one of the factors for the significant YoY decline in equipment revenues in 4Q15.

For diversified exposure to select telecom companies in the US, you may consider investing in the SPDR S&P 500 ETF (SPY). SPY held a total of ~2.8% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of March 2016.

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