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Guest blog post by Zach Burnham, Accounting Student, Suffolk University.

By now, most people are probably aware of T-Mobile’s new aggressive business strategy. The self-proclaimed “Uncarrier” has been antagonizing AT&T and Verizon, the two dominant corporations in the cellular carrier industry. After the merger between T-Mobile and AT&T did not succeed, T-Mobile was forced to expand on its own. They reached a deal to acquire MetroPCS by late 2013. With a new marketing campaign and additional assets, T-Mobile is trying to threaten the industry’s status quo.  After reviewing T-Mobile’s financial statements, it seems that consumers are enjoying the unconventional business strategy.  Using Calcbench’s benchmarking tool, I was able to quickly compile data into a series of useful tables.

The Revenue Growth graph shows that T-Mobile’s revenue grew, in 2013, by a little more than $2.2 billion, which represents a 46% increase. This increase is significantly higher than the increase in revenue of AT&T and Verizon (about 5.5%).

T-Mobile also reported net income of $35 million for 2013, which is substantially better than the $7.3 billion loss in 2012. The substantial losses in 2012 and 2011 were likely due to impairment charges (impairment charges are an operating expense that allows a company to write off worthless goodwill). It is interesting note that the sudden increase in Net Income for AT&T and Verizon is simply explained by a decrease in selling, general and administrative expenses in the 4th quarter.

 

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In addition to making the company more profitable, T-Mobile is addressing the lack of wireless coverage in less populous areas. It is certainly an obstacle preventing potential customers from switching to T-Mobile, and therefore, a hindrance to capturing a respectable market share. Throughout 2013, the property, plant, and equipment account has increased by over $11 billion, and the spectrum licenses account has increased by $16 billion (spectrum licenses are licenses granted by the FCC that allow a broadcaster to use a certain band wave). The increases in these accounts indicate that T-Mobile is pushing to expand wireless coverage drastically.  AT&T and Verizon have not had remotely comparable investments in the past 2 years.

The substantial increase in T-Mobile’s Total Assets of about $16 billion from 2012 to 2013 (which represent almost a 50% increase in assets), seems to have been financed roughly equally by debt and equity.  Both debt and total equity increased by over $8 billion each.

AT&T and Verizon have been responding to T-Mobile’s business strategy by instituting plans that are similar to the generous options offered by T-Mobile. It seems they have real concerns that T-Mobile can steal market share.

To delve deeper into T-Mobile’s, and other companies’, financial statements, sign up for a free Calcbench trial. Also, make sure to check out the Knowledge Base and Resource Library (located under the “Resources” tab) for more information on how to begin using the powerful analytical tools Calcbench offers. If you have any questions, please send your emails to us@calcbench.com.


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