- T-Mobile is increasingly picking up fiber assets
- Everybody wants to know about T-Mobile’s ambitions beyond Metronet and Lumos
- Management is sticking to its talking points while leaving doors open
Forget about postpaid phone net adds. The predominant theme of T-Mobile’s earnings call today was fiber, as in: how big is T-Mobile appetite for it?
Historically a pure-play wireless company, T-Mobile is on a fiber binge. In April, it announced intentions to acquire Lumos through a joint venture with investment firm EQT. More recently, it’s teaming with KKR to invest $4.9 billion for a 50% equity stake in Metronet.
Combined, these deals position T-Mobile to reach about 10 million homes with fiber by the end of 2030. That’s on top of the fiber foray it’s doing with open access network operators like Intrepid Fiber, SiFi Networks and Tillman FiberCo.
Quizzed during today’s Q2 earnings call about its fiber strategy and intentions of going even bigger, T-Mobile CEO Mike Sievert was both confident and coy.
“We have some further appetite, but not much,” Sievert said.
“These transactions that we have done get us millions of homes passed and do it in a way that we think is really smart and positive for our shareholders, so while we’re open minded to things that fit this strategy, [it] would have to be the right deal. Our appetite is somewhat limited for more,” he said.
As any good CEO or negotiator does, he played down the likelihood of keeping up this pace of fiber transactions.
“I can tell you we’re not currently working on another transaction like this and since they’ve been coming every month or two, I want to make that clear,” Sievert said.
The remark followed what Sievert said during the last earnings call: that T-Mobile is taking a “capital light” approach to fiber. That has led some to wonder how “capital light” is defined.
Of course, the only logical question after hearing Sievert tone down the rhetoric about more deals is: Where might they go next? Recon Analytics analyst Roger Entner outlined several possibilities, with the obvious answer being properties west of the Mississippi.
Ziply, a fiber provider in the Northwest, is one candidate he mentioned. Ziply reportedly just hired bankers and is considering a sale, according to New Street Research.
FWA feeding frenzy
One of the reasons T-Mobile is so stoked about fiber is it feeds off its fixed wireless access (FWA) service. That’s its high-speed internet service that uses extra capacity on its mobile network. T-Mobile ended Q2 with 5.6 million high-speed internet customers,
“We sell fixed wireless access in places in the network where we have excess capacity that won’t be consumed either now or in the future by normal mobile usage,” said T-Mobile Marketing President Mike Katz on the earnings call.
“That’s where we sell fixed wireless. In places where we deploy fiber, there’s an opportunity for us take some of the demand that we’re seeing in fixed wireless where those excess capacity pockets don’t exist and move them to fiber, so there’s really a bunch of complementary features to it," he continued.
Convergence has been a big topic for at least 20 years. Dozens of “pure play” wireless companies existed in the late 1990s-early 2000s PCS/cellular era, but they were gobbled up by larger rivals that eventually rolled into the likes of wireline-affiliated entities like AT&T and Verizon. T-Mobile, a product of PCS pioneer VoiceStream Wireless, was the lone nationwide “pure play” wireless competitor to persevere.
Until now, that is. Asked about the need for converged offers, Sievert stressed the wireless heritage of T-Mobile.
“One thing we feel very strongly about is that these transactions are not defensive of our mobile business,” Sievert said. “We believe that our mobile business stands strongly alone. Consumer choice has been made very clear that wireless is a deeply considered sale. It’s the primary purchase decision in a connected life and that people will choose the wireless company that is right for them and we believe we will compete effectively as a pure play wireless company regardless of our simultaneous participation in broadband.”
That being said, “convergence is real,” and T-Mobile customers already are purchasing bundles. Many of T-Mobile’s existing 5.6 million high-speed internet customers purchased it as part of a discounted bundle.
“Convergence is happening” in that people are buying bundles, but it’s not happening in the sense that “if you don’t have this product, you can’t compete in mobile,” Sievert said. “We have zero evidence to support that thesis.”
Don’t forget the attaboys
For the record, the earnings call included plenty of back slapping for the T-Mobile team on its wireless results.
“It was a fantastic quarter as you guys saw,” with 777,000 postpaid phone net adds, said Jon Freier, president of the T-Mobile Consumer Group.
The 777,000 net adds were the highest for a second quarter in the company’s history. By comparison, AT&T reported 419,000 postpaid phone net adds in Q2 2024. Verizon reported a net loss of 8,000 phone lines in the consumer division, offset by 156,000 postpaid phone net additions in the business segment, resulting in a net gain of 148,000 phone customers.
All that bodes well for T-Mobile, with or without convergence, but we’re going to bet more fiber transactions are in the offing. Otherwise, what’s there to talk about?