United States

CUSTOMER DEVELOPMENT

thousands
  Dec. 31, 2017 Dec. 31, 2016 Change Change % Dec. 31, 2015
USA          
Mobile customers 72,585 71,455 1,130 1.6 63,282
Branded customers a 58,715 54,240 4,475 8.3 49,326
Branded postpaid a 38,047 34,427 3,620 10.5 31,695
Branded prepay a 20,668 19,813 855 4.3 17,631
Wholesale customers a,b 13,870 17,215 (3,345) (19.4) 13,956
 
a On September 1, 2016 T-Mobile US sold its marketing and distribution rights to certain of T-Mobile US’ existing co-branded customers to a current wholesale partner for nominal consideration (the MVNO Transaction). Upon the sale, the transaction resulted in a transfer of 1,365 thousand branded postpaid customers and 326 thousand branded prepay customers to wholesale customers. Prospectively from September 1, 2016, net customer additions for these customers are included within wholesale customers.

b T-Mobile US believes current and future regulatory changes have made the Lifeline program offered by T-Mobile US’ wholesale partners uneconomical. T-Mobile US will continue to support its wholesale partners offering the Lifeline program, but has excluded the Lifeline customers from the reported wholesale subscriber base resulting in the removal of 4,528 thousand reported wholesale customers beginning in the second quarter of 2017. No further Lifeline adjustments are expected in future periods.

At December 31, 2017, the United States operating segment (T-Mobile US) had 72.6 million customers compared to 71.5 million customers at December 31, 2016. Net customer additions were 5.7 million for the year ended December 31, 2017 – excluding Lifeline customer activity beginning in the second quarter of 2017 – compared to 8.2 million net customer additions for the year ended December 31, 2016 due to the factors described below.

Branded customers. Branded postpaid net customer additions were 3,620 thousand for the year ended December 31, 2017, compared to 4,097 thousand branded postpaid net customer additions for the year ended December 31, 2016. Branded postpaid net customer additions for the year ended December 31, 2017 were lower compared to the year ended December 31, 2016, primarily due to higher deactivations from a growing customer base, a decrease in the number of qualified branded prepay customers migrating to branded postpaid plans, and lower gross customer additions from increased competitive activity in the marketplace.

Branded prepay net customer additions were 855 thousand for the year ended December 31, 2017, compared to 2,508 thousand branded prepay net customer additions for the year ended December 31, 2016. The decrease was due primarily to higher MetroPCS brand deactivations from a growing customer base and increased competitive activity in the marketplace. Additional decreases resulted from the optimization of T-Mobile US’ third-party distribution channels.

Wholesale customers. T-Mobile US believes current and future regulatory changes have made the Lifeline program offered by T-Mobile US wholesale partners uneconomical. T-Mobile US will continue to support its wholesale partners offering the Lifeline program, but has excluded the Lifeline customers from the reported wholesale subscriber base resulting in a removal of 4,528 thousand reported wholesale customers beginning in the second quarter of 2017. No further Lifeline adjustments are expected in future periods. Taking the aforementioned approach into consideration Wholesale net customer additions were 1,183 thousand for the year ended December, 2017, compared to wholesale net customer additions of 1,568 thousand for the year ended December 31, 2016. The decrease was due primarily to lower gross customer additions, partially offset by lower customer deactivations. Net customer activity for Lifeline was also excluded beginning in the second quarter of 2017.

DEVELOPMENT OF OPERATIONS

millions of €
    2017 2016 Change Change % 2015
Total revenue   35,736 33,738 1,998 5.9 28,925
Profit from operations (EBIT)   5,930 3,685 2,245 60.9 2,454
EBIT margin % 16.6 10.9     8.5
Depreciation, amortization and impairment losses   (5,019) (5,282) 263 5.0 (3,775)
EBITDA   10,949 8,967 1,982 22.1 6,229
Special factors affecting EBITDA   1,633 406 1,227 n. a. (425)
EBITDA (adjusted for special factors)   9,316 8,561 755 8.8 6,654
EBITDA margin (adjusted for special factors) % 26.1 25.4     23.0
Cash Capex   (11,932) (5,855) (6,077) n. a. (6,381)

Total revenue

Total revenue for the United States operating segment of EUR 35.7 billion in 2017 increased by 5.9 percent compared to EUR 33.7 billion in 2016. In U.S. dollars, T-Mobile US’ total revenues increased by 8.1 percent year-on-year due primarily to service revenue growth resulting from increases in T-Mobile US’ average branded customer base from strong customer response to T-Mobile US’ Un-carrier initiatives and success of the MetroPCS brand. Additionally, equipment revenues increased due primarily to a higher average revenue per device sold, an increase from the purchase of leased devices at the end of the lease term, and increased proceeds from liquidation of returned customer handsets, partially offset by a decrease in lease revenues due to T-Mobile US’ continued focus on equipment installment plan sales.

EBITDA, adjusted EBITDA

Adjusted EBITDA increased by 8.8 percent to EUR 9.3 billion in 2017, compared to EUR 8.6 billion in 2016. In U.S. dollars, adjusted EBITDA increased by 10.7 percent in 2017, compared to 2016. Adjusted EBITDA increased due primarily to an increase in branded postpaid and prepay service revenues resulting from strong customer response to T-Mobile US’ Un-carrier initiatives, the ongoing success of promotional activities, and the continued strength of the MetroPCS brand, partially offset by higher commissions, employee-related costs, promotional costs, higher costs associated with network expansion, and the negative impact from hurricanes in Texas, Florida and Puerto Rico. The negative impact in 2017 from lost revenue, assets damaged or destroyed and other hurricane-related costs incurred was approximately EUR 250 million. As of December 31, 2017, T-Mobile US expects additional expenses to be incurred and customer activity to be impacted in the first quarter of 2018, primarily related to
T-Mobile US’ operations in Puerto Rico. T-Mobile US has not recognized any potential insurance recoveries related to those hurricane losses as it continues to assess the damage and hold discussions with its insurance carriers. Adjusted EBITDA margin increased to 26.1 percent in 2017, compared to 25.4 percent in 2016 due to the factors described above.

EBITDA in 2017 included special factors of EUR 1.6 billion compared to special factors of EUR 0.4 billion in 2016. The increase in special factors related primarily to a spectrum impairment reversal in 2017. Overall, EBITDA increased to EUR 10.9 billion in 2017, compared to EUR 9.0 billion in 2016 due to the factors described above, including the impact of special factors.

EBIT

EBIT increased to EUR 5.9 billion in 2017, compared to EUR 3.7 billion in 2016 driven by higher EBITDA and lower depreciation expense related to devices leased under T-Mobile US’ JUMP! On Demand program, partially offset by an increase from the continued build-out of T-Mobile US’ 4G/LTE network.

Cash Capex

Cash capex increased to EUR 11.9 billion in 2017, compared to EUR 5.9 billion in 2016, due primarily to EUR 7.3 billion of spectrum licenses acquired in 2017, compared with EUR 1.7 billion of spectrum licenses acquired in 2016. Excluding the effects of spectrum acquisitions, cash capex increased by EUR 0.4 billion in 2017, compared to 2016, due primarily to growth in network build as T-Mobile US continues deployment of low band spectrum and begins deployment of 600 MHz spectrum.