T-Mobile US Inc. sigange is displayed outside a store location in New York, U.S. (Photographer: Jeenah Moon/Bloomberg)

T-Mobile's Subscriber Rolls Jump as It Pursues Sprint Clearance

Subscribe to Bloomberg | Quint
The Daily Newsletter
News & Stock Alerts

(Bloomberg) -- T-Mobile US Inc. posted stronger-than-expected subscriber growth, bringing a tailwind to a company pursuing a blockbuster merger with Sprint Corp.

T-Mobile, which announced the $26.5 billion deal on Sunday, added 1 million new wireless subscribers in the first quarter. That was up from 914,000 a year earlier, and exceeded the 820,000 average estimate compiled by Bloomberg.

The company has been attracting customers with perks like free Netflix. Smartwatches also have brought a flood of new subscribers. The latest devices, such as the Apple Watch Series 3, have their own network connections. That means they require separate wireless subscriptions.

The results extend momentum at a carrier that has long been the industry’s fastest-growing player. But the numbers will likely be overshadowed by a potential showdown in Washington, where regulators will weigh whether the Sprint merger harms competition. Given the history of antitrust opposition, some analysts are giving the transaction only 50-50 odds of passage.

Sales grew to $10.5 billion last quarter, topping the $10.3 billion predicted by analysts. Earnings amounted to 78 cents a share, compared with an estimate of about 71 cents.

The Bellevue, Washington-based carrier also raised its forecast for new subscribers this year to between 2.6 million and 3.3 million, up from a prior range of 2 million to 3 million.

Shares of T-Mobile rose as much as 2 percent to $60.63 in late trading after the results were posted. They were down 6.4 percent this year through Tuesday’s close, hurt in part by concerns about the Sprint deal.

Network Strategy

Sprint and T-Mobile have complementary wireless spectrum that may serve as a strategic advantage as the companies build a 5G network. T-Mobile controls a large portfolio of lower-band airwaves that can travel long distances and pass through walls and windows. Sprint, meanwhile, has the largest U.S. holding of higher-band, 2.5-gigahertz spectrum, which can handle more data capacity but over limited distances.

Sprint is controlled by Tokyo-based SoftBank Group Corp., and T-Mobile is majority-owned by Germany’s Deutsche Telekom AG, which will have the biggest stake in the combined entity. The overseas ownership creates another hurdle: It could expose the proposed merger to scrutiny by a secretive national security panel that reviews acquisitions of U.S. businesses by foreign investors.

In addition to approval from the Justice Department, the deal will need the OK from the Federal Communications Commission. During the Obama administration, both agencies took the position that competition could be harmed if the number of national carriers went down to three from four. President Donald Trump’s FCC chairman, Ajit Pai, has said he remains open about the number of major players in the U.S. mobile market. That stance appears to leave the Justice Department as the major hurdle.

©2018 Bloomberg L.P.

Bloomberg
Stay Updated With Business News News On BloombergQuint
Subscribe to Bloomberg | Quint
The Daily Newsletter
News & Stock Alerts