Why T-Mobile Expects Stable Postpaid Growth in 2018

Under its existing revenue accounting standards, T-Mobile (TMUS) continues to expect its postpaid phone ARPU (average revenue per user) in 2018 to be stable compared to 2017. In 2017, T-Mobile reported branded postpaid phone ARPU of $46.97, down ~1.1% from $47.47 in 2016.

According to the company, this YoY (year-over-year) reduction in postpaid phone ARPU was mainly driven by dilution from promotions targeting families and new segments as well as the adverse impact of hurricanes quantified at $0.09.

During the Deutsche Bank Media, Telecom & Business Services Conference on March 7, 2018, Braxton Carter, T-Mobile’s chief financial officer, talked about T-Mobile’s postpaid phone ARPU growth going forward. Carter stated, “Our strategy is to scale the business in a stable ARPU environment because that’s going to unlock more value than monetizing additional revenue per subscriber.”

In 2017, T-Mobile reported postpaid ABPU (average billing per user) of $60.49, down ~3.6% from $62.75 in 2016. According to the company, this significant YoY reduction in its postpaid ABPU was mainly driven by lower lease revenues, growth in its branded postpaid other customer base with lower ARPU, and the adverse impact of hurricanes quantified at $0.08.

ABPU consists of installment payments made by postpaid subscribers as well as service revenues. These installment billings are labeled as equipment revenues.

Installment billings and service revenues are stable revenue sources for major US wireless carriers such as T-Mobile, Sprint (S), Verizon (VZ), and AT&T (T). T-Mobile’s JUMP! installment plan is similar to AT&T’s Next plan and Verizon’s Device Payment Plan.