T-Mobile Tops Profit Estimates, Sees 75% Free Cash Flow Gain

Scott Moritz, Bloomberg News

A T-Mobile store in New York, US, on Monday, Oct. 24, 2022. T-Mobile US Inc. is scheduled to release earnings figures on October 27. , Bloomberg

(Bloomberg) -- T-Mobile US Inc. exceeded Wall Street profit estimates and forecast 75% growth in free cash flow for 2023, sending a clear signal that its Sprint Corp. merger integration and 5G network lead are paying off.

Fourth-quarter earnings, excluding some items, came to $1.18 a share, the Bellevue, Washington-based mobile service provider said Wednesday. Analysts had estimated $1.12.

The company’s full-year free-cash-flow forecast is for $13.1 billion to $13.6 billion. Analysts expected about $13.6 billion.

Coming off its highest mobile-phone customer gains in 2022, the second-largest US wireless carrier plans to add 5 million to 5.5 million new subscribers this year. Analysts surveyed by Bloomberg had projected 5.8 million, including 2.8 million new phone customers, raising concern that a cool-down in the mobile sector may be ahead.

T-Mobile typically raises its customer-growth projections over the course of the year, but given the cautious outlooks last week by AT&T Inc. and Verizon Communications Inc., that trend seems less assured. AT&T offered a disappointing free-cash-flow view and Verizon put its earnings target below Wall Street estimates, suggesting the mobile sector may be bracing for a tougher consumer spending environment.

“We are not seeing anything in consumer behavior” to indicate a slowdown, Chief Financial Officer Peter Osvaldik said in an interview Wednesday. “We are seeing some inflationary pressures on the margin” on the cost side, he said.

T-Mobile added 2 million wireless home broadband subscribers last year and Osvaldik said the company was still on track to hit its 7 million to 8 million customer count by 2025. The service has been an attractive internet-access alternative, but new efforts to expand fiber and upgrade cable networks could slow wireless broadband growth.

Merger synergies were $6 billion last year and the company projects an improvement to $7.2 billion to $7.5 billion.

Last month, the company said a hacker obtained information on 37 million customer accounts. It was the latest in a string of breaches the company has encountered. The fact that only 37 million accounts were affected this time shows the progress T-Mobile has made in securing customer data, Chief Executive Officer Mike Sievert said on the earnings call Wednesday.

“We are confident that our aggressive cybersecurity plan, working with the support of some of the world’s experts, will allow us to achieve our goal of becoming second to none in this area,” Sievert said on the call.

T-Mobile shares were up less than 1% at $149.50 at 9:44 a.m. in New York. The stock is up more than 6% this year.

(Updates with CEO comment in second-to-last paragraph and shares.)