Third-place wireless carrier T-Mobile US Inc.(TMUS) is gearing up to report fourth-quarter earnings Tuesday before the opening bell, and while it already pre-announced on the upside, investors and analysts will want to hear more about how its chipping away at Verizon Communications Inc. (VZ) and AT&T Inc.’s (T) wireless dominance.
For the fourth quarter, Wall Street is expecting T-Mobile to weigh in with earnings of $0.29 a share on revenue of $9.84 billion. In January, T-Mobile said it added 1.2 million postpaid wireless customers in the fourth quarter, including 933,000 new postpaid phone customers. The wireless carrier also said 2016 marked the third year in a row it added more than 8 million net customers. When T-Mobile reported third-quarter results, the company raised its postpaid customers forecast for all of 2016 to between 3.7 million and 3.9 million. Postpaid customers are more lucrative for T-Mobile because they tend to be loyal and stay with their carrier and plan. (See also: T-Mobile Beats Q3 Views, Stock Surges.)
Chief Executive John Legere even predicted shortly after its strong showing in the third quarter that the wireless carrier upstart will surpass AT&T in five years. Speaking on CNBC’s “Squawk on the Street,” Legere said he thinks AT&T is “bleeding” and was forced to ink its $85.4 billion deal to buy Time Warner Inc. (TWX) because it needed to find new areas of revenue and growth.
Pulling Out All the Stops
The fourth quarter has been a busy one for T-Mobile on the promotions front, rolling out a slew of new initiatives designed to steal share from its rivals. Wall Street analysts and investors will want to know how those deals are resonating with customers and at what cost to T-Mobile’s gross margins.
Take its headline-grabbing announcement at the 2017 Consumer Electronics Show last month. Back then, T-Mobile said it was getting rid of extra taxes and fees, with customers of its unlimited plans getting the price they see in advertisements. Following that, T-Mobile announced it was waiving sales tax when customers purchase a new smartphone. It also continued its battle with AT&T during the quarter, targeting its DirecTV Now over-the-top streaming video service by offering DirecTV Now customers who already switched to T-Mobile to get a free year of DirecTV Now a free year of Hulu instead, the streaming video service that competes against DirecTV Now. In a press release, T-Mobile said the move to offer Hulu instead of DirecTV Now is the result of customer complaints, pointing to a slew of media reports in recent weeks that highlighted troubles with DirecTV Now. (See also: T-Mobile Goes After AT&T's DirecTV Now Again.)
While T-Mobile is aggressively stealing market share from its rivals, and more of that is expected during 2017, it does operate in a very competitive and highly saturated wireless market. Zacks pointed out in an earnings preview report that success in the wireless telecom market “depends on technical superiority, quality of services and scalability.” Zacks isn’t expecting T-Mobile to post upside to its fourth-quarter estimate for earnings of $0.29 a share.