Thanks to aggressive pricing and a slew of promotions, T-Mobile (TMUS) added 1.3M branded postpaid subs (1.2M phone subs), 465K branded prepaid subs, and 600K non-branded subs in Q1. The branded postpaid figure dwarfs Verizon's (VZ) 539K and AT&T's (T) 625K - the difference in phone adds is even larger - and compares with a net loss of 333K for would-be suitor Sprint (S).
Regulators mulling a Sprint/T-Mobile tie-up are doubtlessly paying attention, and the same goes for AT&T and Verizon: The former has responded more aggressively to T-Mobile's price cuts thus far than the latter.
Thanks to the strong Q1 numbers, which come after T-Mobile added 1.645M total subs (869K branded postpaid) in Q4, the carrier now expects 2.8M-3.3M branded postpaid net adds in 2014, up from a prior 2M-3M. Cash capex is still expected to be in a range of $4.3B-$4.6B.
At the same time, T-Mobile's strategy continues taking a near-term toll on its bottom line: Adjusted EBITDA fell 26% Y/Y to $1.09B, and T-Mobile has cut its full-year adjusted EBITDA guidance to $5.6B-$5.8B from $5.7B-$6B. Adjusted EBITDA margin fell 400 bps Q/Q to 20%.
Service revenue rose 4.5% Y/Y to $5.34B. Branded postpaid churn fell 20 bps Q/Q and 40 bps Y/Y to 1.5% (a new record). ARPU fell $0.69 Q/Q to $50.01. "Simple free cash flow" (adjusted EBITDA - cash capex) was $141M, down from $357M in Q4 and $239M a year ago.