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T-Mobile Consistently Beating Earnings Estimates: Here’s Why

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Aug. 16 2018, Published 1:24 p.m. ET

T-Mobile and earnings estimates

When T-Mobile (TMUS) reported its second-quarter results on August 1, this third-largest US wireless carrier posted better-than-expected earnings but missed revenue expectations. Its earnings results have consistently exceeded Wall Street estimates in the last eight quarters.

In comparison, Verizon Communications (VZ), the top US wireless carrier, posted better-than-expected numbers on both earnings and revenues. AT&T (T), the second-largest carrier, topped earnings expectations but posted weaker-than-expected revenue results in the second quarter. Sprint (S), which has agreed to merge with T-Mobile, also exceeded earnings and revenue expectations in its fiscal first quarter of 2018 that ended on June 30.

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T-Mobile’s Q2 results

In the second quarter, T-Mobile delivered adjusted earnings of $0.92 per share, which not only surpassed consensus estimates by 5.7% but also rose 37% YoY (year-over-year). Revenues grew 4% YoY to $10.57 billion in the second quarter.

Strong growth in its second-quarter earnings was driven by top-line growth, which was driven by 6.5% growth in service revenues, consistent postpaid and prepaid customer additions, a lower postpaid phone churn rate of 0.95%, and higher adjusted EBITDA growth of 7% YoY.

Strong customer base

T-Mobile boasts a strong customer base, which pushed up its service revenues. It added ~1.6 million net customers in the second quarter, with a total customer base of 75.6 million as of June 30. That’s 8.7% higher than its Q2 2017 number.

The company added 686,000 postpaid phone customers in the quarter and 91,000 prepaid customers. Its postpaid phone net additions were higher sequentially at 617,000 customer additions and YoY at 533,000 customer additions.

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