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The Growth in T-Mobile’s Service Revenue Improved in 1Q16



T-Mobile’s revenue composition

In the previous part of this series, we observed that T-Mobile’s (TMUS) YoY (year-over-year) revenue growth was robust at ~10.6% in 1Q16. The figure reached ~$8.6 billion for the quarter. We also saw that the YoY wireless revenue growth of Verizon (VZ) and AT&T (T) was in the negative territory in 1Q16.

Among the top four US mobile players, only Sprint (S) has not yet disclosed its results for the quarter. Now let’s look at the 1Q16 performance of the key individual components of T-Mobile’s revenue: service revenue and equipment revenue.

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T-Mobile’s service revenue in 1Q16

T-Mobile’s  service revenue continued its solid growth trend, increasing by ~13% YoY to reach ~$6.6 billion during 1Q16. In 4Q15, this stream had increased by ~11.7% YoY.

The YoY growth in the service revenue came mostly from the telecom company’s postpaid component. T-Mobile’s service revenue in the postpaid component grew by ~14% YoY to ~$4.3 billion in 1Q16. Meanwhile, the carrier’s prepaid service revenue increased by ~9.9% YoY to reach ~$2 billion in 1Q16.

T-Mobile’s equipment revenue in 1Q16

Year-over-year, T-Mobile’s equipment revenues were stable in 1Q16. T-Mobile’s equipment revenue reached ~$1.9 billion during the quarter. According to the company, year-over-year, the adoption of its leasing plan—Jump! On Demand—was one of the factors that negatively affected the growth in the equipment revenue during the quarter.

For a diversified exposure to telecom companies in the US, you may consider investing in the iShares Core S&P 500 ETF (IVV). This ETF held a total of ~2.8% in some of the US telecom players at the end of March 2016.


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