T-Mobile beats phone subscriber estimates as lockdown creates demand surge

(Reuters) – T-Mobile US Inc (TMUS.O) added more monthly bill paying phone subscribers than expected in the first quarter, thanks to a surge in demand for cheaper phone services as people work from home amid lockdowns.

However, the telecoms operator did not give a full-year outlook, citing uncertainty over the impact of the COVID-19 pandemic, following in the steps of its competitors AT&T Inc (T.N) and Verizon Communications (VZ.N).

It added 452,000 net new monthly paying phone subscribers in the first quarter, above analysts’ estimates of 426,000, according to research firm FactSet.

T-Mobile’s postpaid phone churn, or the rate of customer cancellations, for the first-quarter was 0.86%, compared to 0.88% last year, reflecting store closures and nationwide stay-at-home orders.

The company posted a marginal rise in revenue to $11.1 billion from a year earlier, but missed expectations of $11.4 billion.

T-Mobile had closed 80% of its stores to comply with the lockdown. However, an increase in service revenue offset the fall in demand.

Net income rose to $951 million from $908 million a year earlier. Excluding items, it earned $1.10 per share, above analysts’ average estimate of $1.02 per share.

The company said it was expanding its 5G rollout as demand continues to rise during the lockdowns.

The report was T-Mobile’s first earnings since it closed its $23 billion merger with Sprint Corp in April and switched its executive leadership.

In the second quarter, it said the coronavirus pandemic would continue to negatively impact it while it integrated Sprint’s network.

T-Mobile expects to add up to 150,000 net monthly phone subscribers in the second quarter. The company said that its merger-related costs would range from $500 million to $600 million before taxes and its COVID-19 pandemic-related costs would be between $450 million to $550 million before taxes.

Last week, T-Mobile said in a preliminary report that Sprint lost 348,000 monthly phone subscribers in the first quarter, more than double the amount of Sprint’s subscriber losses from last year.

The filing also said that Sprint defines subscribers differently from T-Mobile and that the Sprint results would be materially lower once T-Mobile reporting policies were applied. Sprint’s standalone results for the first quarter are expected to be released in May.