T-Mobile issued an upbeat Q1 earnings report where it added 532,000 postpaid phone subscribers, beating the analysts estimate. It also logged its lowest ever Q1 subscriber churn rate along with a slowdown in phone upgrades.
Both were attributed to the fact that customers love its network and don't want to leave it, even though AT&T also logged a record low churn but a drop in revenue from phone purchases.
On the financial side of things, T-Mobile's earnings before interest, taxes, depreciation and amortization went up by 8% compared to the same quarter last year to $7.6 billion, again beating the forecast by a tad.
The Un-carrier's year-on-year service revenue, however, was down to $19.59 billion, and one analyst is predicting that this could ultimately force T-Mobile to raise plan prices. According to Bryan Kraft from Deutsche Bank, this may happen as soon as June:
A significant development during T-Mobile's earnings call was the disclosure by management that T-Mobile will be implementing some form of price increase, which we believe could be announced shortly and take effect most likely in June.
T-Mobile has been more measured than its large competitors in talking price, actually doing very little to date. While T-Mobile now seems about to take a somewhat larger bite of the apple, we think that the company is taking care to remain underneath of the AT&T and Verizon pricing umbrella and maintain its position as the value leader in the market.
Currently, T-Mobile indeed enjoys lower plan prices than Verizon or AT&T, especially for multiple lines and family plans:
T-Mobile Essentials
AT&T Value Plus
Verizon Unlimited Welcome
1 line
$50
$50
$65
2 lines
$90
$100
$110
3 lines
$90 (3rd line free)
$115
$120
4 lines
$100 (limited time offer)
$125
$120
5 lines
$125
$155
$150
Throttling
at >50GB
n/a
no
Video streaming
SD
SD
SD
Hotspot per line
3G speeds
5GB at full speed
-
The difference in plan prices between Verizon, T-Mobile, and AT&T, however, is not as significant as it was a few years back. At the time, T-Mobile wanted to gain market at all costs to its financial results, while the other two big carriers were laughing on their way to the bank.
Older T-Mobile plan pricing might have to go up
Besides the good quarterly numbers, T-Mobile also unexpectedly raised its revenue and profit forecast for the year somewhat. It now expects net customer additions to be between 5.2M-5.6M for the year, up from the 5M-5.2M range.
What's more, T-Mobile now expects a $100 million higher adjusted cash flow figure going forward. According to its CEO Mike Sievert, T-Mobile looked at the growth in the last quarter, and decided to "edge up our guidance to make sure we are keeping investors targeted on our most contemporary views of how our year will unfold."
What might be the reason for T-Mobile's newly founded revenue optimism and raised 2024 guidance numbers? Why, the extra money it would get from raising "some" plan prices, as per that same CEO Mike Sievert during T-Mobile's quarterly earnings call with investors:
I will tell you that nothing we do is going to question or challenge our long-standing strategy of being the value leader in this market. But surely, over the span of many years, what that means kind of changes over time. Costs have risen. Changes have happened in a broader industry context.
And we're going to jealously guard that value leadership. And I think customers understand that if there are changes around the margins once every many years in a world where costs change, they'll understand and accept that. We've actually made changes here and there over the past six months. We've understood what that looks like and what that takes.
And there may be more changes, particularly with older rate plans.
Long story short, T-Mobile might be preparing to raise at least some of its plan prices, bringing them more in line with the rising costs of its 5G network deployment. It just remains to be seen by how much, and an announcement may happen as soon as next month.
Daniel, a devoted tech writer at PhoneArena since 2010, has been engrossed in mobile technology since the Windows Mobile era. His expertise spans mobile hardware, software, and carrier networks, and he's keenly interested in the future of digital health, car connectivity, and 5G. Beyond his professional pursuits, Daniel finds balance in travel, reading, and exploring new tech innovations, while contemplating the ethical and privacy implications of our digital future.
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