T-Mobile (TMUS) reported fourth quarter earnings that missed expectations, despite adding 934,000 mobile phone subscribers, above estimates of roughly 886,000. The wireless carrier said its targeting 5 million to 5.5 million net customer additions this year.
T-Mobile CEO Mike Sievert told Yahoo Finance, "The big strategy is one of perpetuating our brand proposition for being the best value in the marketplace, and we have no intentions of changing that."
Editor's note: This article was written by McKenzie DeGroot
Video Transcript
BRIAN SOZZI: All right. T-Mobile out with its latest earnings results. Let's get right to T-Mobile CEO Mike Sievert. Mike, hot off the earnings call here. Thanks for coming on Yahoo Finance. So look, I've-- you know, I've been covering you guys for a while, especially your leadership. And on your earnings call, you really start to talk about some price increases. That's the first time I've heard this from you and T-Mobile. Walk us through this.
MIKE SIEVERT: Well, first, Sozz, thanks for having us. It's great to be here just minutes after our conference call. You know, listen, for us, the big strategy is one of perpetuating our brand value proposition for being the best value in the marketplace. And we have no intentions of changing that.
And what customers have been doing is generally self-selecting up our rate Card they can't get enough of T-Mobile. When they buy it, they tend to buy some of our best plans. And they offer the most data and the most generous usage policies for other devices, et cetera. That's wonderful, because that's great for them so they can take full advantage of the most capable 5G network. But it's also great for us because it sees our average revenue per account rising.
It rose 1.8% in Q4. We just put out a confident guide for about 2% for 2024. And all that's without the kind of pricing shenanigans that our competitors do.
BRIAN SOZZI: Where do you see opportunities to take price?
MIKE SIEVERT: Well, you know, it's about optimizations in how we efficiently deliver features to customers. For example, we changed how our autopay discount works in Q4. And despite that, we had a normative sequential churn movement in Q4 to Q3. Right now, we've changed taken a lead from Netflix, we've changed a little bit the Netflix offer, but also added, Hulu because Netflix has changed their portfolio.
And so these are things that we do that are guided by our brand value proposition to be the best value in the market, that are guided by what customers will appreciate and accept, but also guided to how we can be more efficient and effective in how we serve our customers, so that we can compete. And if we grab an optimization here and there, it's for one reason-- so we can compete.
BRIAN SOZZI: I just want to just clarify, and then I'll move on, Mike. A lot of real consumers, T-Mobile users, come on to Yahoo and come on Yahoo Finance, so their bill is not going up a lot this year.
MIKE SIEVERT: No, not unless they decide to take a new plan that gives them even more, like Netflix included, Hulu included. We have Apple TV on some of our plans. We have incredible data buckets for your other devices and other great features with our go 5G plan portfolios, which might be better than the plans that they're on. You see a lot of that happening.
BRIAN SOZZI: You made a great point on the earnings call, Mike, one that I always enjoy watching-- I know you stream it on YouTube-- that people are holding on to their phones longer than they ever have been before. How is that changing the telecom industry?
MIKE SIEVERT: Well, for one thing, we subsidize deeply when you get a new phone. And so for us, it's not-- it's not a good thing to slam a phone on you if you're not ready for it. And on the other hand, if you are ready for it. It's important we're there with a really competitive compelling offer. When people want those new phones, they don't want any barriers. They want us to be there and put it in their hands at a great deal. And that's what we do.
Just what we don't do is slam it to people who don't want it, just to lock them into a three-year price plan, so they can't leave. And that just wouldn't be who we are. So we have lower upgrade rates at T-Mobile, and yet some of the most satisfied customers in the industry. And that's a win-win for both us and for our customers.
BRIAN SOZZI: I just had the opportunity, Mike, over at the World Economic Forum to talk to a lot of tech leaders. And of course, main topic there is AI. And I talked to Qualcomm CEO Cristiano Amon, who was really bullish on putting AI on smartphones. Notably, I believe, it was the new Samsung coming out. Whatever it was, do you think the shift to AI on smartphones means big business and big upgrades for your business later this year? Or is this a 2025 thing?
MIKE SIEVERT: It's hard to tell. But today's smartphones are so feature-rich and capable. And AI algorithms, after the training process is complete, can be handled on them. And that's kind of what Cristiano is pointing out. And new smartphones will get even more capable in that era.
There's no question that we're just in an unprecedented moment in technology history. And one of the things you're going to find is that as AI takes more and more root and transforms from just text based to being audio and visual and video, you're going to see that the payloads of data that people move between their person, let's say, their smartphone and the cloud just continue to grow. And that's a real advantage for 5G. And it's a real advantage for T-Mobile's distinctive high-capacity 5G network.
And so we're really pleased with the development, because we think it'll just point out the advantages that we have in the market.
BRIAN SOZZI: On the cool tech front, where do things stand with your SpaceX relationship?
MIKE SIEVERT: Well, we just launched the very first satellites and completed the first T-Mobile direct-to-satellite test cells. And so we were able to text to space and back with the first direct to cell communication of a T-Mobile phone. And that's incredible. So we're the next phase here is just lots of launches. They're going to need to get lots of satellites into the air. And we should be able to get a beta going later this year as a result.
BRIAN SOZZI: Who are you targeting with a program like this?
MIKE SIEVERT: Anybody that wants to be connected anywhere they can see the sky. And that's so critical. This country has 500,000-square miles where no wireless provider covers it. And it's very important for anybody, whether it's that lonely country road or whether it's being out in the wilderness or whether it's being on a waterway, anywhere, where if you can see the sky, you're connected, and you can get help, and you can text a loved one, and you can be found. And that's important for absolutely everybody.
BRIAN SOZZI: Mike, too, I wanted to get to the Affordable Connectivity Program. That's slated to potentially end in April. Right now, it's benefiting 23 million households. What's your expectation around that program?
MIKE SIEVERT: Well, I think it's a lot more important dynamic for some of the broadband providers. And as it relates to mobile, I'll be very surprised if that program ends if people disconnect their mobile phones. Mobile is just so essential. What they may do is make sure they have the best deal from a great value brand. And that's where T-Mobile is well positioned, because we have some of the best value brands out there, starting with our flagship Metro by T-Mobile brand and many others, including Assurance Wireless that's specifically targeted for people with very tight economic circumstances.
And so we have some customers on that as well, especially on our Assurance Wireless brand. And there's some financial risk there, fully covered in the guidance range that we outlined today. But it's also an opportunity for us. We're going to be there to stand up for people if they lose those subsidies with an incredible value so that we can serve them. And T-Mobile has always known how to serve people with tighter economic circumstances.
BRIAN SOZZI: Lastly, Mike, we're asking all leaders this is going to be an interesting year for a lot of big public companies, of course, going into the presidential election later this year. As a leader, how are you preparing your business, and then your people for what could be a really volatile back half of the year?
MIKE SIEVERT: Well, it's just-- in our culture, it's just about being there for each other and lifting each other up. And we have a really distinctive culture at T-Mobile that is about loving our customers, and you can't give them the best possible customer experience unless you have a culture that's supportive and inclusive and allows us to pick each other up.
The external world, not just politics, which are stressful for people no matter which side you're on, but the whole external environment right now is stressful and difficult. And we create a culture at T-Mobile where people are able to bring their best selves to work and be in a supportive environment. And that translates into how we treat customers with the highest net promoter scores in the industry.
