T-Mobile Committed to Vigorous Pursuit of Incentive Auction Spectrum, Legere Says
T-Mobile offered a positive take on the TV incentive auction Tuesday, in comments by CEO John Legere as the carrier released Q3 results. The tone of a call by company executives with analysts was upbeat as T-Mobile reported it continues to take customers from its rivals. T-Mobile reported 2.3 million total net adds, including 1.1 million postpaid adds.
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T-Mobile officials made clear on a call with analysts they don't plan to use equity or equity-linked financing for the auction and believe they have sufficient debt capacity without risking adverse rating consequences.
“We’re committed to participating vigorously in the incentive auction to fill out and bolster our nationwide low-band spectrum,” Legere said. “This new spectrum is a game changer for us. It travels twice as far and works four times better in-building.” T-Mobile’s new devices all use the 700 MHz spectrum the carrier is deploying, he said. Legere said he expects the auction quiet period to start in January for carriers and said it won’t affect how his company does business, at least over the next quarter.
T-Mobile Chief Financial Officer Braxton Carter said he expects little activity among carriers buying and selling 700 MHz licenses leading up to the 600 MHz incentive auction. “We’ll get what we need in that auction,” he said. The auction will be “transformational” for T-Mobile and will help the carrier on customer retention, Carter said. T-Mobile will be “disciplined, but aggressive” in its bidding in the auction, he said.
Carter also noted that on Monday T-Mobile announced it would issue secured debt in T-Mobile USA for the first time, aimed at raising $1 billion. The company thought “it would be good to have a benchmark security out there,” he said.
Legere said he expects some “dark horses” to show up for the auction. Google, Comcast, Charter and Dish Network are widely viewed as potential bidders. Legere said it’s “crazy” to believe that only carriers will take part in next year’s auction or that the market belongs to only four major wireless carriers. “We don’t see … a threat,” he said. “We’re waiting for this vibrant industry to consolidate itself around players like ourselves that have a significant presence.”
On another regulatory issue, Chief Technology Officer Neville Ray said T-Mobile isn't particularly concerned about a push by Sprint and others to get the FCC to clamp down on special access prices (see 1510160060) . “We resolved our backhaul problem for our cell sites several years ago,” Ray said. “We embarked on a fiber-to-the-cell strategy. … That’s been a huge help for us with our LTE rollout.” T-Mobile is going deeper into rural areas and backhaul is harder to find there, he said. “That’s less of a special access issue,” he said. It’s “not so much our battle to fight on this one,” Ray said. “We’re in a good place already.”
T-Mobile started trading on Nasdaq Tuesday as TMUS. Legere said being on the same exchange as tech companies made the most sense for the company. T-Mobile executives were in New York, where they rang the opening bell at Nasdaq Tuesday. The stock closed down 5.7 percent Tuesday at $39.02
“T-Mobile's third quarter results show no sign of letting the foot off the gas, at least with respect to subscriber growth,” Craig Moffett, analyst at MoffettNathanson, said in a note to investors. “T-Mobile has once again beaten growth expectations, and they have once again raised full-year subscriber guidance.” Moffett said T-Mobile’s approach has changed, with less emphasis on price. “They are now winning subscribers on a formula of higher speeds and, increasingly, a bigger footprint,” he said. “Going forward, T-Mobile's footprint expansion, not super-low prices, will be the key to its growth.”
T-Mobile reported a positive postpaid porting ratio of 1.8 compared to the industry as a whole, which means that 1.8 customers switch to T-Mobile for every customer who changes in the other direction. Against other major carriers it had a positive 1.33 ratio versus Verizon, 1.98 vs. AT&T and 2.09 vs. Sprint, the company said. “The simple answer in we’re taking the most customers from AT&T,” Legere said. “The full answer is … everybody.”
Legere called the Q3 results “fantastic,” saying “we continue to inflict pain on the duopoly by solving customer pain points.” For Q3, T-Mobile reported net income of $138 million compared with a $94 million loss during the same period a year ago. In Q2, T-Mobile earned $361 million. The carrier had $7.8 billion revenue during the quarter, which was slightly below estimates. Sprint, the last of the four major wireless carriers to report, will release numbers next week.