T-Mobile expects temporary hit from new pricier plans
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A T-Mobile logo is seen on the storefront door of a store in Manhattan, New York, U.S., April 30, 2018. REUTERS/Shannon Stapleton
By Harshita Mary Varghese
July 23 (Reuters) - T-Mobile said on Thursday it expects third-quarter postpaid account additions to decline sequentially as the telecom operator upgrades its rate plans, sending its shares down nearly 7%.
The company is phasing out older wireless plans and migrating affected customers to newer options that offer features like unlimited premium data and device upgrades, but are more expensive.
That strategy is also expected to lead to a temporary increase in customer churn in the current quarter, the company said. T-Mobile has also been facing intense competition from AT&T and Verizon.
The company expects about 250,000 net postpaid accounts in the third quarter, below Visible Alpha-compiled analysts' average estimate of about 304,000 additions. It added 277,000 postpaid accounts in the previous quarter, which was already a 13% decline from a year earlier.
T-Mobile has been modernizing its wireless plan portfolio and enhancing benefits for legacy customers as part of a broader push to migrate subscribers to its newer plans, Chief Operating Officer Jon Freier told Reuters.
"We are seeing new customers really kind of adopt our most premium plans at a rate of about 60% of total sales."
The company raised its adjusted free cash flow to between $18.4 billion and $18.8 billion, from $18.1 billion to $18.7 billion previously.
The raise is from continued efficiencies, particularly in cash income taxes, but also we have other working capital benefits as we deploy some advanced AI tools, Finance Chief Peter Osvaldik told Reuters.
T-Mobile has expanded beyond wireless and into fiber through acquisitions and joint ventures, though analysts note its planned fiber footprint remains considerably smaller than that of AT&T and Verizon.
Quarterly average revenue per postpaid account rose 2% to $152.91, compared with $149.87 a year ago, while profit came in at $2.99 per share, compared with analysts' average estimate of $2.59, according to data compiled by LSEG.
(Reporting by Harshita Mary Varghese and Jaspreet Singh in Bengaluru; Editing by Shinjini Ganguli)
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