T-Mobile US, Inc. — Q1 2024 Form 10-Q
Business context and reporting period. Unaudited results cover the three months ended March 31, 2024, compared with Q1 2023. T-Mobile operates as a single operating segment, providing postpaid, prepaid, wholesale and other wireless services, as well as devices.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $19.594 billion | $19.632 billion | Down $38 million; essentially flat |
| Service revenue | $16.096 billion | $15.546 billion | Up 4% |
| Operating income | $3.998 billion | $3.397 billion | Up 18% |
| Net income | $2.374 billion | $1.940 billion | Up 22% |
| Diluted EPS | $2.00 | $1.58 | Up $0.42 |
| Operating cash flow | $5.084 billion | $4.051 billion | Up 25% |
| Adjusted EBITDA (non-GAAP) | $7.652 billion | $7.199 billion | Up 6% |
| Core Adjusted EBITDA (non-GAAP) | $7.617 billion | $7.052 billion | Up 8% |
| Adjusted Free Cash Flow (non-GAAP) | $3.347 billion | $2.401 billion | Up 39% |
Adjusted EBITDA margin was 48%, up 2 percentage points; Core Adjusted EBITDA margin was 47%, also up 2 points. Both are non-GAAP measures calculated against service revenue. The effective tax rate was 24.4%, compared with 24.5%.
Revenue mix: Postpaid revenue rose 6% to $12.631 billion, supported by higher average postpaid accounts and ARPA. Prepaid revenue edged down 1% to $2.403 billion. Wholesale and other service revenue fell 16% to $1.062 billion, while equipment revenue declined 13% to $3.251 billion.
Cash, investment and debt: Cash and cash equivalents were $6.708 billion at quarter-end, versus $5.135 billion at December 31, 2023. Investing cash outflow was $1.787 billion, including $2.627 billion of property and equipment purchases, partly offset by $890 million of proceeds related to securitization transactions. Financing cash outflow was $1.666 billion. Balance-sheet debt was $78.213 billion, including $5.356 billion short-term debt; MD&A reports $80.6 billion of debt and financing lease liabilities, excluding tower obligations. Tower obligations were $3.751 billion. The company reported no borrowings under its $7.5 billion revolver or $2.0 billion commercial-paper program and compliance with restrictive debt covenants.
Material changes versus Q1 2023
- Operating expenses declined 4% to $15.596 billion, lifting operating income despite nearly flat total revenue. Lower service costs, SG&A and merger-related costs contributed; depreciation and amortization increased 5% to $3.371 billion.
- Postpaid accounts grew 4% to 30.015 million. Total customers reached 120.872 million, up 5%, but total net customer additions decreased 11% to 1.172 million. Postpaid net account additions declined 24% to 218,000.
- Postpaid phone churn improved to 0.86% from 0.89%; prepaid churn was nearly unchanged at 2.75%. Postpaid ARPA increased 2% to $140.88, while prepaid ARPU declined 2% to $37.18.
- Merger-related costs fell to $130 million from $358 million. Net income included $97 million of merger-related costs, net of tax, versus $268 million a year earlier.
- Share repurchases were $3.6 billion and cash dividends were $769 million. The prior-year quarter had $4.619 billion of repurchases and no common-stock dividend payments shown in cash flows.
Outlook, commentary and risks
- Management expects 2024 capital expenditures to be lower than in 2023 as prior 5G network investments reduce current build-out needs; future spending includes deployment of recently acquired spectrum. No specific full-year revenue, earnings or cash-flow guidance is provided in the filing text.
- The company intends to pay approximately $3.0 billion in total dividends in 2024. It expects annual per-share dividend growth of around 10%, with the first increase expected in Q4 2024; declarations remain subject to Board discretion. Up to $11.7 billion remained under the $19.0 billion stockholder return program at March 31, 2024.
- Management expects remaining merger restructuring and integration costs to be incurred by the first half of 2024, though related cash payments will extend beyond 2024. It expects operating liquidity sources to cover anticipated business needs over the next 12 months and longer term, excluding potential acquisitions, spectrum purchases and stockholder returns.
- DISH did not purchase the 800 MHz spectrum by the April 1, 2024 deadline. T-Mobile retained the $100 million non-refundable extension fee, which it expects to recognize as a Q2 2024 gain, and commenced an auction. It is not required to sell below the specified $3.6 billion minimum price.
- The Ka’ena acquisition, including Mint Mobile, received regulatory approvals after quarter-end and was expected to close May 1, 2024. Estimated net upfront payment was approximately $950 million, subject to adjustments, with about 45% expected in cash. The company also announced a proposed Lumos fiber joint venture; its expected investment is approximately $950 million at closing plus an additional approximately $500 million commitment in 2027–2028.
- Key risks include competition, substantial indebtedness, spectrum availability and regulatory obligations, cyberattacks and data privacy, and litigation. The 2021 cyberattack settlement remains subject to appeal; further losses related to cyber proceedings and inquiries are reasonably possible but not clearly estimable. The 2023 API incident involved data from approximately 37 million customer accounts and has prompted consumer litigation and regulatory inquiries.
- The company reported effective disclosure controls at quarter-end and no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Whether postpaid growth, ARPA gains and churn trends persist, and whether slower net additions—particularly in High Speed Internet and prepaid—continue.
- Cash generation quality: Adjusted Free Cash Flow includes securitization proceeds, which declined year over year; review the company’s non-GAAP definitions and reconciliation alongside GAAP operating cash flow and capital spending.
- Debt maturities, borrowing costs and refinancing needs, including the rise in short-term debt and the effect of further debt-funded investments or shareholder returns.
- Timing, final consideration and integration effects of Ka’ena and Lumos, as well as planned payments for spectrum licenses, including the $3.5 billion 600 MHz purchase commitments.
- Outcome of the 800 MHz spectrum auction, DISH-related arrangements, and continuing cyberattack litigation and regulatory inquiries, including any additional financial or reputational impact.