T-Mobile US Results Reflect Impact of Price War

For the full year, T-Mobile posted $26.1 billion in revenues and adjusted EBITDA of $5.3 billion. The consensus revenue estimate was $25.99 billion.

T-Mobile began selling the iPhone 5S and 5C from Apple Inc. (NASDAQ: AAPL) on September 20, and although the company did not provide a break-out of iPhone sales, T-Mobile did say it sold 6.2 million smartphones in the fourth quarter, which includes sales to prepaid branded customers. Smartphone sales accounted for 91% of phone sales in the quarter.

The company reported that it ended 2013 with more than 46.7 million customers, a jump of 1.65 million sequentially. Subscriber numbers are not T-Mobile’s problem, profits are. The nearly 8% drop in EBITDA in the quarter is clearly a function of the company’s aggressive pricing in its competition with AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ) and Sprint Corp. (NYSE: S).

The company’s CEO said:

Our performance in the fourth quarter and the full year is clearly proving that we have our strategy right and that we are executing it well. Customers are fed up with the old ways and are voting in favor of choice, innovation and doing business with a company that cares about them and is willing to earn their business. For shareholders, we transformed the Company into a fierce, growing competitor that is changing the wireless industry and creating significant value.

A key metric for T-Mobile is its average revenue per user (ARPU). For its branded prepaid customers, ARPU slipped sequentially from $52.20 to $50.70. Branded prepaid ARPU rose slightly from the third quarter, from $35.71 to $35.84. Once again, as customers adopt T-Mobile’s lower cost plans, ARPU drops and that makes it harder to boost EBITDA.

For 2014 T-Mobile said it expects adjusted EBITDA in the range of $5.7 billion to $6 billion and branded postpaid net subscriber additions of 2 million to 3 million. That is EBITDA growth of 7.5%, which is not too shabby.

T-Mobile shares traded down about 0.3% early Tuesday morning, at $32.20 in a 52-week range of $16.01 to $34.10. The consensus target price for the shares was around $32.20 before this report.