T-Mobile US, Inc. (TMUS Quick QuoteTMUS - Free Report) reported relatively modest third-quarter 2022 results with healthy customer growth driven by diligent execution of operational plans. The Bellevue, WA-based company delivered industry-leading growth in postpaid and broadband customers driven by its 5G network and best value combination with a focus on customers. However, both the bottom line and the top line missed the respective Zacks Consensus Estimate.

Net Income

Net income in the quarter was $508 million or 40 cents per share compared with $691 million or 55 cents per share in the prior-year quarter. The decline was due to merger-related costs and other special expenses, net of tax of $1.8 billion or $1.41 per share. The top line missed the Zacks Consensus Estimate of 53 cents.

Revenues

Quarterly total revenues declined to $19,477 million despite a healthy improvement in service revenues due to lower equipment revenues. The top line lagged the consensus estimate of $20,083 million.

Segment Results

Total Service revenues grew 4.3% year over year to $15,361 million, which include Postpaid service revenue growth of 6.9% ($11,548 million) driven by higher customer account and average revenue per account (ARPA). T-Mobile recorded 1.6 million postpaid net customer additions and 854,000 postpaid phone net customer additions in the quarter – the best in the industry. Postpaid phone average revenue per user (ARPU) improved 1.7% year over year to $48.89, led by premium services, including Magenta MAX.

Prepaid revenues remained relatively flat at $2,484 million. Prepaid net customer additions were 105,000 in the quarter. Prepaid ARPU declined 1.6% to $38.86. Wholesale and other service revenues were $1,329 million, down 7.5% year over year. The company recorded high-speed Internet net customer additions of 578,000 – the best in the industry for the fourth consecutive quarter.

Equipment revenues totaled $3,855 million, down 17.3% year over year. Other revenues were $261 million, up 7.8%.

Other Details

Total operating expenses increased to $18,196 million from $18,040 million in the year-ago quarter. Operating income decreased to $1,281 million from $1,584 million. T-Mobile recorded an adjusted EBITDA of $7,039 million compared with $6,811 million a year ago.

Cash Flow & Liquidity

During the first nine months of 2022, T-Mobile generated $12,445 million of cash from operating activities compared with $10,917 million in the year-ago period. Free cash flow was $5,472 million for the first nine months of the year compared with $4,534 million in the prior-year period.

As of Sep 30, 2022, the company had $6,888 million in cash and cash equivalents with $64,834 million of long-term debt. During the quarter, T-Mobile repurchased 4.9 million shares for $669 million

2022 Guidance Raised

T-Mobile has raised the guidance for 2022 across the board. The company now expects postpaid net customer additions between 6.2 million and 6.4 million, an increase from prior guidance of 6 million and 6.3 million. Core adjusted EBITDA (adjusted EBITDA less lease revenues) is estimated to be between $26.2 billion and $26.4 billion, an increase from prior guidance of $26 billion and $26.3 billion. It anticipates cash from operating activities within $16.3 billion to $16.5 billion, changed from prior guidance of $16 billion to $16.3 billion.

Cash purchases of property and equipment, including capitalized interest, are projected between $13.7 billion and $13.9 billion, up from prior guidance of $13.5 billion and $13.7 billion. Free cash flow, including payments for merger-related costs, is estimated in the $7.4 billion to $7.6 billion range, changed from prior guidance of $7.3 billion to $7.6 billion.

T-Mobile is on track to complete the Sprint customer network migration mid-year and decommissioning by the year-end. It raised its merger synergies guidance range to $5.7 billion to $5.8 billion for 2022, up from the previous range of $5.4-$5.6 billion. The Ultra Capacity 5G covers 250 million people.

Zacks Rank & Stocks to Consider

T-Mobile currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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