T-Mobile (TMUS) has been consistently spending on capex (capital expenditure) to grow its network. During its first-quarter conference call, T-Mobile said that it had invested $1.4 billion in capex, including $43 million on capitalized interest expenses.
These capex levels are much higher than the company’s spending of $921 million on the purchases of property and equipment in the fourth quarter. However, its capex fell 10.6% YoY (year-over-year) from $1.5 billion.
T-Mobile’s free cash flow
In the first quarter, TMUS’s free cash flow increased significantly by 261.1% YoY to $668 million. T-Mobile’s free cash flow rose as the company continued to deploy 600 MHz (megahertz) and 700 MHz spectrum.
Notably, T-Mobile has been continuing to deploy new spectrum, densify its network, and increase capital spending to lay the groundwork for 5G (fifth-generation) technology. At the end of the first quarter, T-Mobile had covered ~322 million customers with 4G (fourth-generation) LTE (long-term evolution) technology and thus offered the fastest LTE network for the past 17 quarters.
For 2018, the company plans to reach 325 million people with 4G LTE. The company also started the aggressive deployment of 600 MHz in 1Q18, augmenting existing low-band capabilities on 700 MHz. For 2018, T-Mobile expects capex in the range of $4.9 billion–$5.3 billion, including spending for 5G deployment.
T-Mobile has recently announced a megamerger agreement with rival Sprint (S) amid the race for customers and technological innovation. The combined company is expected to boast more than 100 million subscribers to keep the pace with the two largest wireless companies, Verizon (VZ) and AT&T (T). The new company is also expected to create an improved 5G network to give stiff competition to China in the near term.