T-Mobile continues to show that it is a force in the early days of 5G. There were 627,000 postpaid net additions in Q2 2021, which was 2.5 times the same quarter in 2020. Though the wireless provider still paled behind AT&T’s tally of 789,000 postpaid added for the quarter, there is still plenty to celebrate. The “Un-carrier” is reporting a net income of $978 million which is eight times the amount a year ago. Topping off these impressive numbers was a low churn rate for its postpaid subscribers of only 0.87%.
According to T-Mobile President and CEO Mike Sievert, the wireless giant is the largest provider of prepaid wireless in the United States. T-Mobile experienced 76,000 net adds during the second quarter of 2021, with a churn rate of 2.62%. This is an impressive accomplishment considering the shift in the wireless industry where postpaid is eating away at prepaid subscribers.
“We delivered our highest ever postpaid account growth at 349,000 and we continue to focus on capturing quality profitable growth,” said Sievert. “This quarter’s account growth was our highest ever at least in all the years I’ve been here. That’s over 600,000 net postpaid accounts added year-to-date compared to Verizon, which is still negative for so far this year, and AT&T who doesn’t want to share account growth information,” he continued.
Both AT&T and Verizon are also reporting impressive quarters filled with growth. This is leading Wall Street to question how this is possible. Postpaid continues to take prepaid subscribers across the industry and is a factor in the numbers. Speaking on this trend and the economic factors contributing to it, T-Mobile’s Executive Vice President and CFO Peter Osvaldik said that, “you’re seeing that happen more from a macro perspective, lots and lots of people from prepaid moving into the postpaid based on the economic realities that you’re seeing in the country, which makes our prepaid growth that much more impressive.”
But a closer look reveals that there is more to the story. Another obvious area contributing to these trends lies in the number of free phone lines being provided to consumers. Sievert is focusing on expanding T-Mobile’s profitable account relationships. This focus stems from the fact that accounts are new billing relationships for revenue and in many cases, it could be a consumer switching over to T-Mobile from a competitor.
“I heard during the earnings season, one of my competitors sort of said, ‘hey, we’re focused on quality growth and not all accounts are created equal,’ and what I would say to that is, but service revenues are. And T-Mobile led again…service revenue growth was 10% normalized for some things last year, 6% overall service revenue growth, the best in the industry,” said Sievert. “…So, look, there’s some prepaid to postpaid transfers going on, there’s some deepening of account relationships…going on. There’s a lot of dynamics, but…I want to make sure that you’re hearing us focusing on our knitting about growing overall profitable relationships that result in the market’s best service revenue and EBITDA growth,” T-Mobile’s CEO continued.
The number of connected devices also continues to grow and while there are some brands and investors skeptical of how growth is coming about, more devices are another factor to consider. Some are looking at the retail side of things involving free lines and promotions. There are also brands such as TracFone and Verizon that are struggling to retain their customers. DISH Wireless reached an agreement with AT&T that it is hoping will help retain its MVNO subscribers, but some analysts believe that the newest major wireless provider may also be facing lower subscriber numbers.
“We suspect three things are happening at the retail level: 1) free phones and free lines are part of the problem; 2) strong promotions across all three carriers plus cable may be driving a slight acceleration in penetration too (the cost of entering the wireless market has dropped); 3) non-pay disconnects are down for the industry. This reduces a big outflow of subscribers from the industry every quarter, boosting subscriber growth. Much of the strength in postpaid can be explained by the migration from prepaid,” wrote New Street Research’s Jonathan Chaplin. New Street Research is an industry-leading “research boutique focused on the Telecommunications and Technology sectors globally.”
Source: Fierce Wireless