T-Mobile Outpaces Rivals in Second-Quarter Subscriber Gains

T-Mobile US Inc. outpaced rivals again in the second quarter, clocking strong subscriber gains, as revenue climbed 13%.

The No. 3 U.S. wireless carrier added 646,000 mainstream phone connections—the most-lucrative type of wireless subscriber—in the three months ended June 30, far more than any of its competitors. The carrier also upgraded its forecast for full-year customer acquisition.

Long the underdog in a market dominated by Verizon Communications Inc. and AT&TInc., T-Mobile has been grabbing market share in recent years, adding millions of customers in a competitive industry where most consumers already have a phone line. Even so, the carrier’s subscriber base remains much smaller than those of Verizon and AT&T.

Shares T-Mobile, up 14% for the year, were up 11 cents at $45.09 in recent trading.

Analysts generally viewed the quarterly results positively, noting the company continues to deliver on its projections and its boasts of market leadership. Craig Moffett of MoffettNathanson said subscriber results were strong for the quarter. “T-Mobile’s share gains have not slowed at all,” Mr. Moffett said in a note.

By comparison, AT&T Inc., which has avoided promotions and focused instead on retaining its most-profitable customers, lost 180,000 mainstream phone connections in the period. Verizon Communications Inc. added just 86,000 phones while Sprint Corp. took on 173,000 new mainstream phone customers with a strategy of deep discounting.

Wells Fargo analyst Jennifer Fritzsche noted that the net customer growth at T-Mobile, along with other carriers, in the latest quarter didn’t come from large customer additions but largely resulted from far fewer people canceling or switching their services.

The second quarter is typically slow for the wireless industry because of the lack of holiday spending and the absence of new phone introductions. Lately customers have been holding on to their phones longer, as upgrades offer fewer must-have features. Wireless companies also have separated the cost of device from service fees, making the high price of smartphones more apparent to the customer.

T-Mobile’s second-quarter churn, or the monthly cancellation rate, fell to 1.27% among mainstream phone customers from 1.32% a year ago.

The company increased the number of mainstream connections it expects to add this year to 3.4 million to 3.8 million, up from a previous expectation for 3.2 million to 3.6 million. That new forecast is still less than the 4.5 million postpaid customers it added in 2015. In the quarter, total mainstream net adds, including tablets and other devices, were 890,000.

Meanwhile, T-Mobile narrowed its projection for adjusted Ebitda, or earnings before interest, taxes, depreciation and amortization, to a range of $9.8 billion to $10.1 billion for the year from the previous expectation of $9.7 billion to $10.2 billion. That compares with $7.39 billion in 2015.

In the second quarter, profit fell 38% to $225 million, because of higher interest expenses and taxes, as well as lower interest income. Revenue grew to $9.2 billion.