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.
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.
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