T-Mobile impresses with Q3 customer growth as competition heats up

The T-Mobile customer growth engine keeps chugging along, even if profits continue to lag behind.

The country's fourth-largest wireless carrier by subscriber base posted third-quarter a loss of 12 cents a share, on revenue of $7.35 billion. In comparison, Wall Street had an average forecast of a penny a share in earnings and $7.44 billion in revenue.

T-Mobile also said late Monday that it added 2.3 million customers, including 1.4 million customers who paid at the end of the month, also known as post-paid customers, continuing its run of subscriber growth over the past several quarters. Analysts, on average, had expected the company to add a net 956,000 new so-called post-paid customers in the period.

T-Mobile shares were down 13 cents, closing at $27.99 on Monday.

T-Mobile has been riding a wave of momentum thanks to firebrand CEO John Legere and his Uncarrier campaign. Through a combination of network improvements, aggressive promotions, slick marketing that addresses the annoyances of the industry and Legere's constant needling of his rivals on Twitter, T-Mobile has turned its reputation around.

But T-Mobile is no longer the sole agitator in the business. Sprint has shown renewed life under new CEO Marcelo Claure, and has rolled out a series of promotions designed to get consumers to give his carrier a second look. AT&T and Verizon have also jumped on the promotion bandwagon, offering more data in their family plans.

While Legere hinted that Sprint made up some ground on T-Mobile in the recent month, he said that if Sprint was growing, it was taking market share away from the larger rivals. But he wasn't optimistic about his rival's results. "Don't hold your hopes out for any customer adds there," he said at fireside chat at Recode's Code/Mobile conference on Monday.

Legere said in September he expects to surpass Sprint in customers by the end of the year, and believes it's premature to call the company a legitimate competitor.

"Put a fork in it," he said about Sprint's ability to hang on to the No. 3 position. "They're done."

T-Mobile ended the period with 52.9 million customers. As of the end of the second quarter, Sprint had 54.6 million customers, and the company reports its results next Monday.

T-Mobile's results come after AT&T and Verizon Wireless both reported results last week. While Verizon missed its per-share earnings mark by a penny, it continued to add customers thanks to growth in the tablet business. AT&T likewise showed strong customer growth, although it was aided by connected cars and other devices.

T-Mobile telegraphed its strong customer results back in September, when Legere touted adding a gross 2.75 million new customers in August, the greatest number of new customers added in a single month. His point at the time: that the company's most recent quarter was its best one, and that the momentum was still firmly behind his company.

The company sold 6.9 million smartphones in the period, or 93 percent of all phones sold. The numbers were helped by the debut of Apple's iPhone 6 and iPhone 6 Plus, which came in the last month of the quarter. While he didn't provide any figures, he called it the biggest launch in the company's history, and acknowledged it was still hit by supply constraints.

The turnover rate for its branded postpaid business fell 10 basis points to 1.6 percent, but rose 10 basis points from the second quarter as a result of seasonal issues.

As a result of its faster customer growth, T-Mobile raised its full-year expectations for post-paid net customer growth to a range of 4.3 million to 4.7 million, up from a prior range of 3 million to 3.5 million.

On the prepaid side, T-Mobile added 411,000 net new customers through its MetroPCS arm, cementing itself as a major player in the category. AT&T is still working through the integration of customers on its Cricket Wireless prepaid arm. Sprint, which runs both Boost Mobile and Virgin Mobile, has yet to report its results.

While T-Mobile has had no trouble growing customers in the past year, the company has struggled with consistent profits. Investors worry that the company its aggressive promotions are taking its toll on profitability, although Legere has argued that those new customers signing up today will yield more profits down the line.

T-Mobile's losses widened to $94 million, or 12 cents a share, from a year-ago loss of $36 million, or 5 cents a share. Revenue did rise 10 percent from a year earlier period.

So can T-Mobile add customers and make money? Legere said "absolutely," and added he also sees sustainable customer growth.

The company expects its full-year adjusted earnings before interest, taxes, depreciation and amortization to be at the lower end of its $5.6 billion to $5.8 billion range, a result of higher customer growth.

Updated at 8:36 p.m. PT: To include comments from T-Mobile at the Recode conference.