United States

Customer development

Customers

At March 31, 2023, the United States operating segment (T‑Mobile US) had 114.9 million customers, compared to 113.6 million customers at December 31, 2022. Net customer additions were 1.3 million in the first quarter of 2023, compared to 1.4 million in the first quarter of 2022 due to the factors described below.

Postpaid net customer additions were 1.3 million in the first quarter of 2023, compared to 1.3 million in the first quarter of 2022. Postpaid net customer additions were relatively flat due to lower postpaid phone net customer additions, primarily due to lower gross additions driven by continued normalizing of industry growth closer to pre-pandemic levels and fewer migrations from prepaid, partially offset by lower churn. This decrease was mostly offset by higher postpaid other net customer additions, primarily due to growth in High Speed Internet, partially offset by lower net additions from mobile internet devices. High Speed Internet net customer additions included in postpaid other net customer additions were 445 thousand and 329 thousand in the first quarter of 2023 and 2022, respectively.

Prepaid net customer additions were 26 thousand in the first quarter of 2023, compared to 62 thousand in the first quarter of 2022. This decrease was primarily due to continued normalization of industry growth toward pre-pandemic levels, partially offset by growth in High Speed Internet and fewer migrations to postpaid. High Speed Internet net customer additions included in prepaid net customer additions were 78 thousand and 9 thousand in the first quarter of 2023 and 2022, respectively.

Development of operations

Revenue, service revenue

Total revenue for the United States operating segment of EUR 18.3 billion in the first quarter of 2023 increased by 2.1 %, compared to EUR 17.9 billion in the first quarter of 2022. In U.S. dollars, T‑Mobile US’ total revenues decreased 2.3 % during the same period. Total revenues decreased primarily due to lower equipment revenues partially offset by higher service revenues. The components of these changes are described below.

Service revenues increased in the first quarter of 2023 by 7.6 % to EUR 14.5 billion. This increase resulted from higher postpaid revenues, primarily due to higher average postpaid accounts and higher postpaid Average Revenue per Account (ARPA). This increase was partially offset by lower wholesale and other service revenues, primarily from lower Lifeline and MVNO revenues and lower prepaid revenues, primarily from lower prepaid Average Revenue per User (ARPU), partially offset by higher average prepaid customers.

Equipment revenues decreased in the first quarter of 2023 primarily from a decrease in the number of devices sold primarily driven by higher postpaid upgrades in the prior-year period related to facilitating the migration of Sprint customers to the T‑Mobile US network and an increase in contra-revenue primarily driven by higher imputed interest rates on equipment installment plans (EIP). In addition, equipment revenues decreased due to a decrease in lease revenues and customer purchases of leased devices primarily due to a lower number of customer devices under lease as a result of the continued strategic shift in device financing from leasing to EIP. The decrease in equipment revenues was partially offset by higher average revenue per device sold primarily driven by higher promotions in the prior-year period, which included promotions for Sprint customers to facilitate their migration to the T‑Mobile US network, partially offset by a decrease in the high-end phone mix.

Adjusted EBITDA AL, EBITDA AL

In euros, adjusted EBITDA AL increased by 5.9 % to EUR 6.5 billion in the first quarter of 2023, compared to EUR 6.2 billion in the first quarter of 2022. The adjusted EBITDA AL margin increased to 35.8 % in the first quarter of 2023, compared to 34.5 % in the first quarter of 2022. In U.S. dollars, adjusted EBITDA AL increased 1.3 % during the same period. Adjusted EBITDA AL increased primarily due to lower average cost per device sold driven by a decrease in the high-end phone mix, higher service revenues as discussed above and higher realized Sprint Merger-related synergies. This increase was partially offset by lower equipment revenues as described above and higher site costs related to the continued build-out of our nationwide 5G network. In U.S. dollars, lease revenues decreased as a result of the continued strategic shift in device financing from leasing to EIP by 70.0 % in 2023.

Adjusted core EBITDA AL increased by 11.5 % to EUR 6.4 billion in the first quarter of 2023, compared to EUR 5.7 billion in the first quarter of 2021. In U.S. dollars, adjusted core EBITDA AL increased by 6.6 % during the same period. The change was primarily due to the fluctuation in adjusted EBITDA AL, discussed above, excluding the change in lease revenues.

EBITDA AL in the first quarter of 2023 included special factors of EUR -0.4 billion compared to EUR -1.3 billion in the first quarter of 2022. The change in special factors was primarily due to lower Sprint Merger-related costs. The change in special factors is also impacted by other special items including certain severance, restructuring and other expenses and income, not directly attributable to the Sprint Merger which are not reflective of T‑Mobile US’ core business activities. Special factors include Sprint Merger-related costs predominantly associated with the integration of Sprint and are comprised of integration costs to achieve efficiencies in network, retail, information technology and back office operations, migrate customers to the T‑Mobile US network and billing systems and the impact of legal matters assumed as part of the Sprint Merger. In addition, Sprint Merger-related special factors include restructuring costs, including severance, store rationalization and network decommissioning as well as transaction costs, including legal and professional services related to the completion of transactions. Overall, EBITDA AL increased by 25.6 % to EUR 6.2 billion in the first quarter of 2023, compared to EUR 4.9 billion in the first quarter of 2022, primarily due to the factors described above, including special factors.

Profit/loss from operations (EBIT)

EBIT increased by 74.9 % to EUR 3.6 billion in the first quarter of 2023, compared to EUR 2.0 billion in the first quarter of 2022. In U.S. dollars, EBIT increased by 67.0 % during the same period primarily due to higher EBITDA AL and lower depreciation, amortization and impairment losses. In U.S. dollars, depreciation, amortization and impairment losses decreased 17.5 % primarily due to lower depreciation expense on leased devices, resulting from a lower number of total customer devices under lease and certain 4G-related network assets becoming fully depreciated, including assets impacted by the decommissioning of the legacy Sprint CDMA and LTE networks in 2022. These decreases were partially offset by higher depreciation expense (excluding leased devices) from the continued build-out of our nationwide 5G network.

Cash capex (before spectrum investment), cash capex

Cash capex (before spectrum investment) decreased by 7.5 % to EUR 2.8 billion in the first quarter of 2023, compared to EUR 3.0 billion in the first quarter of 2022. In U.S. dollars, cash capex (before spectrum investment) decreased by 11.4 % due to decrease in purchases of property and equipment primarily due to increased capital efficiency following our accelerated nationwide 5G network build-out in 2022.

Cash capex decreased by 48.3 % to EUR 2.9 billion in the first quarter of 2023, compared to EUR 5.5 billion in the first quarter of 2022. In U.S. dollars, cash capex decreased by 50.7 % primarily due to USD 2.8 billion paid for spectrum licenses won at the conclusion of Auction 110 in February 2022 compared to no spectrum licenses won during the first quarter of 2023.