T-Mobile tops 50m subscribers in Q2 2014, spectrum sparks profit surge

In what the T-Mobile CEO calls a wireless revolution, the firm continues to poach subscribers from rivals, and has now sailed past the 50 million benchmark.

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T-Mobile has succeeded in maintaining subscriber momentum in the battle against rival Sprint, and has swung to profit in its second quarter financial report.

The carrier reported on Thursday Q2 net profit of $391 million with earnings of $0.48 per share, an increase from a loss of $0.19 in the first quarter of 2014 thanks in part due to spectrum license deals with Verizon. (statement)

Total revenue was $7.2 billion, up five percent from Q1 2014 and 15 percent year-on-year. Total operating expenses were $6.2 billion in the second quarter of 2014, down 10 percent from $6.9 billion in the first quarter of 2014 primarily due to a non-cash gain of $731 million from spectrum license transactions.

Analysts polled by Thomson Reuters estimated that T-Mobile would report profit of 8 cents per share -- going from red to black based on a loss of 12 cents per share year-on-year.

T-Mobile ended the second quarter with approximately 50.5 million customers, up 1.5 million from the first quarter. In total, 1 million total branded net customer additions were signed within the quarter, including branded postpaid net additions of 908,000 and branded prepaid net additions of 102,000.

T-Mobile’s total smartphone sales, including sales to branded postpaid and prepaid customers, were 6.2 million units in the second quarter of 2014, equivalent to 93 percent of all phone units sold during the three-month period.

The MetroPCS acquisition and popular UnCarrrier plans appear to be successfully luring even more subscribers to the T-Mobile fold. In addition, with the carrier's marketing push and larger-than-life CEO John Legere, T-Mobile is once again becoming a well-known household name.

"We have completely reversed T-Mobile's trajectory and started a revolution that is changing the rules in wireless," said Legere. "Now -- with more than 50 million customers, 1.5 million customers added this quarter and 5 quarters in a row of over 1 million net new customers -- we are proud to be the fastest growing wireless company in America, with the fastest 4G LTE network and, just this morning, recognized for having the best Customer Service nationwide."

In comparison, while Sprint managed to meet analyst expectations in the firm's first-quarter earnings , defection of subscribers still remains an issue.

Sprint lost 245,000 net contract subscribers during the quarter, marginally better than last quarter's loss of 383,000, and accounts for over 53 million subscribers overall. However, Sprint CEO Daniel Hesse insists that while the company's complete network replacement impacted the network experience, postpaid net subscriber growth in the fourth quarter of the year is expected. The rival carrier reported Q1 profit of $23 million, or one cent per share, on revenue of $8.79 billion.

T-Mobile's postpaid churn was 1.5 percent in the second quarter. In comparison, Sprint's postpaid churn was 2.09 percent (2.05 percent on the Sprint platform).

In recent months, T-Mobile shares have fluctuated based on rumors of a potential acquisition by rival Sprint. However, unless a bid is made soon, the company may soon find itself in the sidekick carrier role as more and more subscribers sign up to UnCarrier plans.

T-Mobile expects the Simple Choice plans and UnCarrier project to continue to drive subscriber growth, and postpaid net additions for 2014 are now expected to be between 3.0 and 3.5 million, up from the prior guidance of 2.8 to 3.3 million.

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