T-Mobile US added more than 450,000 branded postpaid subscribers during the first quarter, reported record-low churn and progress toward network integration and 5G deployment, and believes it is well-positioned to scoop up customers who may turn away from AT&T and Verizon in the coming months due to economic fallout from the ongoing pandemic.

Services revenues hit a record of $8.7 billion, up 5% year-over-year. Net income was at a record level as well, up 5% from the first quarter of 2019 to $951 million.

CEO Mike Sievert said on the company’s quarterly call with investors that while the Sprint merger “took way longer than anyone could have imagined, we took advantage of every moment during the approval process for this deal to plan for a rapid integration of these companies, and we hit the ground running.

“As we dig into our combined businesses, we see an opportunity to move even faster and potentially to unlock even more synergies from this combination than originally planned, opportunities like the acceleration of our retail rationalization and network integration,” he went on. “And we’ll likely see additional upside from our increased scale in areas like procurement and potentially faster improvements in the churn rate of Sprint subscribers than planned.”

T-Mobile US has already opened up roaming on its network to its Sprint subscriber base, so that when the Sprint network is not available, their devices can shift to the T-Mobile network. According to CTO Neville Ray, that network availability is “seeing big uptake” with about 10 million unique roamers on a weekly basis — or more than one-third of Sprint’s postpaid subscriber base. Since network experience has been a major driver of Sprint’s churn, he added,

T-Mobile US reported a total of 777,000 branded postpaid net additions in the first quarter, including 452,000 branded postpaid net adds. The carrier saw a loss of about 129,000 prepaid subscribers, bringing its total branded net additions to 649,000 for the quarter. Postpaid phone churn was 0.86% and prepaid churn was 3.52%; executives said that the low churn rates were due in part to the ongoing pandemic, with customers choosing to stay with their current provider.

However, as social distancing measures around the country are lifted, T-Mobile US expects to see a wireless market with “a large pool of switchers” as users adjust their wireless plans to the emerging economic reality, with tens of millions of lost jobs.

“We’re a proven share-taker, prepaid and postpaid, in times of constrained budgets,” Sievert said.

Mike Staneff, T-Mo’s CMO, said on the quarterly call that “we really enjoy a marketplace where there’s a lot of industry switching, and that’s important for us to continue to grow our net adds as we move forward.” He added that “we’re starting to see some signs that the marketplace is rebounding … but we’ve got a long way to go to get back to normal levels of industry switching and consumer buying behavior.”

On the network side, T-Mobile US has begun deploying 5G sites in Philadelphia and New York City using Sprint’s 2.5 GHz mid-band spectrum — work that it put in motion in terms of zoning, site leasing and building even before the merger had officially closed, Ray said, so that it was ready to be turned up right away once the deal was final. 5G coverage via 600 MHz spectrum has increased from more than 200 million when the service launched, to around 215 million covered today in cities including Detroit, Michigan; Columbus, Ohio; and most recently, the San Francisco Bay area in northern California.

While executives said that they have had to work around permitting delays due to the pandemic, T-Mobile US expanded its 5G footprint print across an additional 1,600 sites in the first quarter and and ramped up its pace to 1,000 sites in April.

“Our plan is to ramp very heavily as we move into this month of May, and on through the year. So, lots of 2.5 gig coming,” said Ray. “New York, Philly all of the northeast markets very much in our sights, as are most of the major metros across the U.S.”

In addition, under special permission from the Federal Communications Commission, T-Mobile US has temporarily doubled the amount of 600 MHz spectrum that it is using in some areas to add to its network capacity. Even without that additional spectrum, Ray said that T-Mobile US now has more than 300 megahertz of combined low- and mid-band spectrum around the country, which he said was nearly double AT&T’s holdings and nearly triple that of Verizon.

T-Mobile US is continuing to provide guidance for the second quarter, but not its full-year performance for 2020, due to the uncertainty around the impacts of the pandemic. The carrier expects to provide full-year 2020 guidance when it reports its second-quarter results. AT&T and Verizon have either withdrawn guidance completely or limited their guidance. T-Mobile US said that it expects to see between 0-150,000 postpaid net additions in the second quarter due to the impacts of COVID-19, including retail store closures and slower growth, partially offset by continued low churn. The carrier expects to see COVID-19-related costs in the second quarter of between $450-$550 million, in addition to $500-$600 million merger-related costs. The COVID-19 financial impacts include an estimated $50 million for facilities cleaning and personal protective equipment.

Despite the overall uncertainty around the impacts of the pandemic, which it expects to affect the business through 2020 and possibly beyond, Sievert struck an optimistic tone about how T-Mobile US might benefit from possible increased levels of customer churn once mobile users are able to leave their homes and feel more comfortable making a change in their wireless carrier.

“People are going to be looking for value. They’re really going to be hungry to make sure they’ve got the right value,” he said. “They’re not going to drop [mobile]. I mean, no way. This category is so important. But they might be asking if they’ve got the right carrier. And if switching comes and is elevated versus these low levels, we will be prepared to stand up and give customers what they’re looking for.

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