T-Mobile US lifts UScellular synergy target, speeds integration timeline in updated guidance (252.66)
- TMUS is providing updated customer and financial guidance as applicable after incorporating the impacts of the UScellular transaction, which closed on August 1st. The company is also providing a brief update on additional business transformation initiatives driven by the Un-carrier's digital transformation journey.
- Synergy updates:
- T-Mobile now expects the UScellular transaction to yield approximately $1.2 billion in total annual run rate cost synergies upon integration, an increase of 20% from the original approximately $1.0 billion run rate synergy guidance, now comprised of approximately $950 million in opex and approximately $250 million in capex run rate synergies.
- The integration is now expected to be achieved in approximately two years, an acceleration from the original three-to-four-year expectation.
- Costs to achieve are expected to be approximately $2.6 billion, within the original guidance range and T-Mobile continues to plan to reinvest a portion of synergies toward enhancing consumer choice, quality and competition in the wireless industry.
- Customer updates:
- Stronger core business performance on T-Mobile postpaid net additions is expected to offset the impacts of the initially higher-churning UScellular base, and overall postpaid and postpaid phone customer guidance for the year is unchanged at this time as a result.
- For Q3, T-Mobile expects the following financial impacts from the UScellular acquisition:
- Service revenues of approximately $400 million
- Core Adjusted EBITDA(1) of approximately $125 million
- Approximately $100 million in costs to achieve as the company begins an accelerated integration process, which are excluded from Core Adjusted EBITDA, and approximately $175 million in depreciation and amortization expenses.
- Acquisition of the lower Postpaid ARPA UScellular base, together with postpaid accounts acquired from the Metronet joint venture also with lower Postpaid ARPA, will impact consolidated T-Mobile Postpaid ARPA by approximately $1.50 in Q3. These acquired customers represent an exciting opportunity to apply the company's proven ARPA expansion playbook as part of integration.
- Excluding UScellular and Metronet, T-Mobile's underlying business continues to see strong Postpaid ARPA growth, with ongoing expectations for full year 2025 versus 2024 growth of at least 3.5%.
- In Q3, to further enable the ongoing rapid success of its digital transformation strategy, T-Mobile is accelerating its move to a more streamlined and dynamic billing technology stack. As a result of the acceleration, the company expects to recognize approximately $350 million in predominantly non-cash costs associated with its digital technology transformation, including non-cash impairment expense and accelerated depreciation related to the retirement of software as part of its shift to a more streamlined and dynamic billing technology stack enabling the company's rapid digital transformation, and personnel costs primarily associated with technology modernization.
- Also in Q3, the company expects its recent acquisitions outside of UScellular, alongside ongoing network investments, to generate an additional $120 million in depreciation, amortization, integration and other expenses.