Evercore: T-Mobile’s fiber business to boost revenue and achieve 40% penetration rate after 2 years
T-Mobile’s fiber business could serve about 5 million U.S. customers and generate up to $5 billion in revenue during the next five years, according to financial analysts at Evercore. That call is the investment advisor firm’s first take at evaluating the maturation of T-Mobile’s fiber plans. It’s based on the assumption that T-Mobile will close its deal to acquire fiber operator Metronet, following the recent closure of another deal with EQT for fiber operator Lumos. Evercore’s projections do not assume that T-Mobile will make a play for another fiber operator like Lumen Technologies.
“Looking to 2030, we expect 14 million [fiber] passings … and 4.8 million subscribers,” the analysts wrote in a note to investors this week. “Assuming a $75 ARPU [average revenue per user] growing 4% year over year implies ~$5 billion of revenue in 2030. “While it hasn’t shared subscriber targets, [T-Mobile] management has expressed confidence that it would see higher long-term market penetration than typical [fiber] overbuilders (e.g., ~35%) benefitting from its national brand and advertising, digital and retail distribution, ability to take advantage of the waiting list it has for FWA [fixed wireless access] in markets where demand outstrips supply,” the Evercore analysts added.
Evercore assumes that T-Mobile Fiber (see plans below) will be able to capture 10% market share within six months of launch and 20% within a year. After two years, the analysts predict T-Mobile Fiber will command 40% penetration (meaning, 40% of the customers reached by its fiber connections will subscribe to those connections).
T-Mobile Fiber Plans:
- Fiber 500 (500 Mbps): Superfast performance for gaming, streaming, and more.
- Fiber 1 Gig (1000 Mbps): Blistering speeds for every device and user in your home.
- Fiber 2 Gig (2000 Mbps): Our fastest speeds and largest capacity for more devices and users.
……………………………………………………………………………………………………………………………………….“For now, until there’s greater color from management, we’ve assumed T-Mobile will see 25% EBITDA [earnings before interest, taxes, depreciation and amortization] margins on its Fiber revenue. This could be conservative over time,” the Evercore analysts wrote. They predicted overall EBITDA from T-Mobile Fiber of around $340 million in 2026, growing to $1.24 billion in 2030. And that, they said, would equate to free cash flow of $270 million in 2026, growing to $1 billion by 2030.
“Pricing will evolve as T-Mobile acquires and operates Metronet and Lumos’ subscribers along with the competitive dynamics across the broadband market. T-Mobile has a clear history of being a disruptor, so it could be more aggressive on pricing than we expect, resulting in downside to our ARPU and revenue estimates,” the Evercore analysts warned. They noted that T-Mobile Fiber in some Colorado markets today costs $55 per month for 500 Mbit/s connections. That’s similar to local incumbents Lumen Technologies ($50 for 500 Mbit/s) and Comcast ($55 per month for 600 Mbit/s).
Convergence of mobile and fiber access will provide a tailwind for T-Mobile, potentially driving increased postpaid phone share and revenue. “Despite management’s tone around the benefits of convergence, we believe there will clearly be an opportunity to drive higher postpaid phone share across the growing number of households that ultimately end up taking T-Mobile fiber,” according to the Evercore analysts. They predicted that T-Mobile’s fiber operations would eventually help improve the operator’s postpaid smartphone net customer additions by up to 650,000 per year, and that it will drive the operator’s annual wireless service revenues up by $200 million to $350 million.
An important insight into T-Mobile’s convergence strategy emerged in the wake of its acquisition of Lumos. “New and existing customers will enjoy VIP treatment through Magenta Status, which includes exclusive benefits like discounts on food, gas, entertainment and top brands, plus freebies every Tuesday in the T-Life app. All with T-Mobile’s standard ‘no exploding bills’ pricing structure,” T-Mobile said of its new Lumos customers.
“One app. All the things,” T-Mobile proclaims of the T-Life app it launched roughly a year ago. The app is available to all T-Mobile smartphone customers – and now its new fiber customers.
“Get the latest exclusive perks from T-Mobile Tuesdays, and take advantage of all your Magenta Status benefits,” T-Mobile said of its T-Life app. “You can also pay your bill, add a line to your account, and track orders straight from the app. And you can manage your account, configure your T-Mobile Home Internet gateway, and more. If you need help with anything, customer care is available at the tap of a button.”
The analysts expect T-Mobile’s fixed wireless access business to continue gaining traction, potentially reaching 7% of the total broadband subscriber base by 2025.
Separately, Verizon is now Evercore’s top pick among wireless network operators and is its top value idea.
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References:
https://www.lightreading.com/fttx/t-mobile-fiber-could-see-5m-customers-and-5b-in-revenue-by-2030
6 thoughts on “Evercore: T-Mobile’s fiber business to boost revenue and achieve 40% penetration rate after 2 years”
Leave a Reply to wigglypaint Cancel Reply
I recall a similar investment in fiber infrastructure by my previous employer which led to a significant surge in revenue and customer satisfaction. I believe T-Mobile’s strategic move will yield similar results, revolutionizing the telecom industry
Evercore’s analysis does not factor in any potential acquisitions of other fiber operators, such as Lumen Technologies, which could further enhance T-Mobile’s market position.
T-Mobile’s fiber expansion looks promising, with significant revenue potential and innovative plans to attract subscribers. Exciting times ahead for the un-carrier!
T-Mobile’s fiber venture is aiming for 40% market penetration within two years. With competitive pricing and strategic acquisitions, it’s poised to disrupt the industry. More importantly, T-Mobile’s recent joint venture with private equity firm KKR is to acquire a 50% stake in fiber provider Metronet.
Metronet is uniquely positioned as the fastest-growing pure play fiber company in the U.S. and an experienced independent fiber-to-the-home (FTTH) operator. The company currently reaches more than 2 million homes and businesses across 17 states with fiber solutions built on a state-of-the art broadband platform. Following the transaction’s close, Metronet will become a wholesale services provider for its retail customers and 100% of its residential fiber retail operations and customers will transition to T-Mobile. T-Mobile will have full responsibility for residential customer acquisition and support, leveraging its differentiated retail, marketing, brand and service model, and will utilize Metronet’s deep digital and fiber infrastructure expertise to expand to more households with fiber broadband services. Metronet will focus on build plans, network engineering and design, network deployment, and customer installation. Following the transaction close, Metronet is expected to be self-funding on a go forward basis and it is expected to reach 6.5 million homes passed by the end of 2030. To support this business plan T-Mobile does not expect to make any additional capital contributions to the JV.
“This is a unique opportunity and a smart, capital-efficient deal that enables T-Mobile to profitably build on our success in broadband and provide fast, affordable and reliable connectivity options to millions more customers nationwide as a complement to our wireless growth strategy,” said Mike Sievert, CEO of T-Mobile. “Metronet is the perfect partner for T-Mobile as a leader in fiber solutions with an incredibly fast build pace, and a top-notch management team. Together with KKR’s strong heritage of corporate partnership and global fiber franchise, we will further expand the Un-carrier’s fiber footprint and deliver real value and choice to customers while addressing a growing demand for fast and reliable broadband.”
“As a leading investor in fiber broadband, KKR has a strong track record of building fiber networks in multiple countries around the world. Since our initial investment in Metronet in 2021, the company has grown rapidly, including constructing new fiber infrastructure and adding subscribers in attractive, underserved markets,” said Waldemar Szlezak, Partner, and Global Head of Digital Infrastructure at KKR. “Our new joint venture with T-Mobile will be transformational for the future of the Metronet business. We look forward to benefitting from T-Mobile’s industry-leading customer experience to support the company in reaching its full potential.”
The JV will be complementary to T-Mobile’s already existing 5G Home Internet offering, a fixed wireless solution currently being used in more than 5 million households and businesses nationwide using fallow network capacity over the Un-carrier’s 5G network, and the company’s previously announced fiber partnerships. This expanded portfolio of offerings will help meet continually increasing consumer demand for higher speed and reliable broadband products.
https://www.t-mobile.com/news/network/t-mobile-kkr-joint-venture-to-acquire-metronet
Evercore’s analysis does not factor in any potential acquisitions of other fiber network operators, such as Lumen Technologies, which could further enhance T-Mobile’s market position.
This is exciting news about T-Mobile’s fiber business! The potential to serve 5 million customers and generate $5 billion in revenue is huge. It will be interesting to see how their acquisition of Metronet and Lumos will play out. Thanks for being so generous with your time to review, edit and approve comments.