T-Mobile US Inc. (TMUS - Free Report) reported strong financial results in the fourth quarter of 2016 wherein both the top line and bottom line outpaced the Zacks Consensus Estimate.However, the company provided a tepid outlook for 2017 branded postpaid net customer addition.
T-Mobile US currently carries a Zacks Rank #3 (Hold). The company competes with the likes of Verizon Communications Inc. (VZ - Free Report) , AT&T Inc. (T - Free Report) and Sprint Corp. (S - Free Report) in the highly price-sensitive U.S. wireless market. All the three above-mentioned companies also carry a Zacks Rank #3.
GAAP net income in the reported quarter was $390 million or 45 cents per share compared with net income of $297 million or 34 cents in the year-ago quarter. Quarterly earnings per share of 45 cents were well above the Zacks Consensus Estimate of 29 cents.
Total revenue jumped 23.4% year over year to $10,175 million in the reported quarter surpassing the Zacks Consensus Estimate of $9,838 million. Segment-wise, Service revenues were up 10.5% year over year to $7,245 million. Sales from Equipment totaled $2,740 million, up a significant 78.4% year over year while Other revenues were $190 million, up 22.6% year over year.
Quarterly operating income was $942 million compared with $838 million in the year-ago quarter. Operating margin in the reported quarter was 9.3% compared with 10.2% in the prior-year quarter. Adjusted EBITDA was $2,548 million, up 11.8% year over year. Adjusted EBITDA margin was 25% compared with 27.6% in the year-ago quarter.
Cash Flow
In the fourth quarter of 2016, T-Mobile US generated $1,602 million of cash from operations compared with $2,233 million in the prior-year quarter. Adjusted free cash flow in the reported quarter was $780 million compared with the $897 million in the year-ago quarter.
Liquidity
At the end of 2016, T-Mobile US had $5,500 million of cash and cash equivalents and short-term securities and $22,186 million of debt outstanding compared with $4,582 million and $26,061 million, respectively, at the end of 2015. The debt-to-capitalization ratio at the end of 2016 was 0.54 compared with 0.55 the end of 2015.
Subscriber Statistics and Other Metrics
As of Dec 31, 2016, the total customer base of T-Mobile US was 71.455 million, up 12.9% year over year. Branded postpaid phone customers totaled 31.297 million, up 6.6%. Branded postpaid mobile broadband customer count was 3.13 million, surging 33.8%. Branded prepaid customer count was 19.813 million, up 12.4%. Wholesale customers tallied 17.215 million, up 23.4%.
In the reported quarter, T-Mobile US added net 0.933 branded postpaid phone customers, 0.264 branded postpaid mobile broadband customers, 0.541 branded prepaid customers and 0.363 wholesale customers. Total net customer addition was 2.101 million, signifying the 15th successive quarter of over one million net customer additions. Quarterly branded postpaid churn was 1.28% compared with 1.46% in the year-ago quarter. Branded prepaid churn was 3.94% compared with 4.20% in the prior-year quarter.
Quarterly branded postpaid phone average revenue per user (ARPU) was $48.37 compared with $48.05 in the prior-year quarter. Branded prepaid ARPU was $38.20 compared with $37.63 in the prior-year quarter. Branded postpaid average billing per user (ABPU) was $63.08 compared with $63.74 in the year-ago quarter.
T-Mobile US, Inc. Price, Consensus and EPS Surprise
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T-Mobile US, Inc. Price, Consensus and EPS Surprise | T-Mobile US, Inc. Quote
Guidance
For 2017, the company anticipates adjusted EBITDA to be in the range of $10.4 - $10.8 billion. Capital expenditure will be in the range of $4.8 - $5.1 billion. The company expects branded postpaid net customer addition to fall in the range of 2.4 to 3.4 million. Its mid-point of 2.9 million is well below the 2016 net addition of 3.3 million.
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