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T-Mobile swings to a profit driven by customer gains
April 26, 2016 / 10:18 AM / 2 years ago

T-Mobile swings to a profit driven by customer gains

(Reuters) - T-Mobile US Inc (TMUS.O) on Tuesday swung to a profit and raised its 2016 forecast for customer additions, as competitively priced plans and free video streaming options helped it add over 1 million new monthly subscribers for the seventh consecutive quarter.

Shares in T-Mobile were last down 2 percent at $40.32, reversing earlier gains.

T-Mobile has rolled out data-only plans, new family price offers and free music and video streaming services in recent months.

Chief Executive John Legere led the rollout of a series of consumer-friendly offers such as the free video streaming option “Binge On,” data rollover plans, and social media campaigns in the past three years. These have helped T-Mobile gain market share, as it is locked in a price war in an oversaturated wireless market with rivals Verizon Communications Inc (VZ.N) and AT&T Inc (T.N) and smaller competitor Sprint Corp (S.N).

T-Mobile, controlled by Deutsche Telekom (DTEGn.DE), said it added 2.2 million customers on a net basis in the first quarter ended March 31, surpassing the average analyst estimate of 1.72 million, according to research firm FactSet StreetAccount.

The Bellevue, Washington-based company said it now expects to add 3.2 million to 3.6 million postpaid customers on a net basis in 2016, compared with its previous forecast of 2.4 million to 3.4 million. Postpaid customers are those who pay monthly bills for the service.

People pass by a T-Mobile store in the Brooklyn borough of New York June 4, 2015. REUTERS/Brendan McDermid

Churn, or the rate at which subscribers defect to other networks, for postpaid users was 1.33 percent in the quarter, up slightly from 1.3 percent a year ago.

“Churn ticked up slightly, likely on the heels of more aggressive competition from Sprint,” New Street Research analyst Jonathan Chaplin said in a research note.

In terms of free cash flow for 2016, investors are looking for $1.5 billion to $2 billion and “we are at $1.9 billion,” Chaplin said.

T-Mobile said revenue jumped 10.6 percent to $8.6 billion. Analysts on average had expected revenue of $8.43 billion, according to Thomson Reuters I/B/E/S.

It reported net income of $479 million, or 56 cents per share, for the first quarter, compared with a loss of $63 million, or 9 cents per share, a year earlier. This blew past analysts’ expectations of 10 cents per share.

To enhance its network capacity, T-Mobile has filed to participate in the U.S. government’s auction of low-frequency spectrum, or airwaves, that kicked off in March. It has said it plans to spend about $10 billion in the auction.

T-Mobile expects a “successful outcome” in the auction and is investing in adding new retail locations, Legere said on an earnings call.

Reporting by Sai Sachin R and Malathi Nayak in Bengaluru; Editing by W Simon and Meredith Mazzilli

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