T-Mobile Earnings: Leasing, Free-Video Impact, User-Growth Eyed
T-Mobile US ( TMUS ) reports earnings early Wednesday for the first time since launching its Binge On mobile video service in November, as analysts await guidance on how the aggressive promotion has impacted subscriber growth, data service revenue and capital spending. Analysts are also expecting earnings-call commentary on how phone leasing plans are impacting revenue and EBITDA (earnings before interest, taxes, depreciation and amortization). “With (the customer) base transitioning to leasing, equipment cost is now treated as depreciation expense and, therefore, excluded from EBITDA. As such, we expect T-Mobile to provide both reported and cash EBITDA guidance for 2016,” said Nomura analyst Jeffrey Kvaal in a research report. T-Mobile, controlled by Deutsche Telekom ( DTEGY ), is expected to report a 1% year-over-year gain in revenue, to $8.2 billion, with EPS ex items rising 28% to 15 cents per share. The company’s Q3 revenue missed estimates, as leasing plans lowered equipment revenue. While T-Mobile in 2013 was first to offer consumers monthly installment payment plans for purchasing mobile phones, it has followed Sprint’s lead into leasing plans. With leasing plans, wireless firms retain ownership of the devices and revenue is recognized over the terms of the leases, usually 18 months or longer. T-Mobile preannounced at a Jan. 6 conference that it added 917,000 postpaid phone subscribers in Q4. Verizon Communications ( VZ ) in January reported that it added 449,000 postpaid phone customers — those billed monthly and more lucrative than prepaid users — while Sprint ( S ) added 366,000. AT&T ( T ) lost postpaid subscribers for the fifth quarter in a row, shedding 342,000. At the same Citigroup conference on Jan. 6, T-Mobile executives said they expect to generate more free cash — revenue from operations minus capital expenses — in 2016. T-Mobile is expected to be a bidder in an upcoming government auction of radio spectrum now used by local TV broadcasters. Along with its “Binge On Demand” promotion that provides free video streaming. T-Mobile in November also doubled its data allowances on many plans. T-Mobile, though, raised prices for all plans above entry-level. Many analysts expect its recent moves to boost its monthly ARPU, or average revenue per user.