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T-Mobile CEO dismisses cable competition but says more convergence is coming

T-Mobile US Inc. CEO John Legere said he was unconcerned about the competitive threat posed by cable companies entering the wireless space in the near term, but he acknowledged that the need to ramp up 5G infrastructure build-outs could push T-Mobile to partner with cable operators in the future.

Speaking during a Feb. 8 earnings conference call, Legere said that as he considers expectations for T-Mobile's growth in 2018, "the furthest thing from my mind is any concern about the impact of cable."

Both Comcast Corp. and Charter Communications Inc. have mobile virtual network operator agreements with Verizon Communications Inc. Comcast launched its wireless offering in 2017; Charter is expected to launch a similar offering this year. The cable companies' mobile offerings rely on a combination of Verizon's network and their own respective Wi-Fi services.

"An MVNO doesn't work; Wi-Fi is not a way to play this game," Legere said, adding that he also believes the cable operators do not have enough retail locations to support a wireless offering.

Comcast ended 2017 with more than 380,000 customer lines on its Xfinity Mobile offering. Legere said he sees Comcast as taking customers primarily from Verizon, saying, "I think Verizon and Comcast [are] going to try to pick each others' pockets."

That said, Legere ultimately left open the door to further convergence between the pay-TV and wireless sectors, saying his only question was around the timing. He said while the U.S. government's lawsuit seeking to block AT&T Inc.'s purchase of Time Warner Inc. "put everything on hold for a while," the need to deploy 5G networks in a timely manner will prompt conversations around the best infrastructure combinations in the media and telecom sectors.

"So is there a possibility in the future that T-Mobile could do something with DISH [Network Corp.] or Sprint [Corp.] or United States Cellular [Corp.]? Yes. Is there a possibility that Comcast or a Charter could do something with us or to us or around us? Yes," Legere said, adding "I believe all of that will happen. It's not a matter of if, it's a matter of when."

Despite the government's challenge to the AT&T/Time Warner deal, Legere said "the pace at which these things are thought about and are going on ... is actually accelerating behind-the-scenes."

Earlier this year, T-Mobile closed on the purchase of the internet TV company Layer3 TV Inc.

T-Mobile on Feb. 8 reported fourth-quarter 2017 net income of $2.71 billion, or $3.11 per share, up from net income of $390 million, or 45 cents per share, in the year-ago quarter. For the full year, net income totaled $4.54 billion, or $5.20 per share, up from $1.46 billion, or $1.69 per share, in 2016. The year-over-year increase was largely due to the positive impact of tax reform. The Tax Cuts and Jobs Act lifted net income by $2.2 billion, or $2.50 per share, in the fourth quarter of 2017. Excluding the impact of tax reform and other one-time items, T-Mobile's adjusted EPS was 48 cents for the fourth quarter of 2017 and $2.29 for full year 2017.

The S&P Capital IQ consensus EPS estimate for the quarter was 38 cents on a GAAP basis and 37 cents on a normalized basis. For the full year, the S&P Capital IQ consensus EPS estimate was $2.46 on a GAAP basis and $2.43 on a normalized basis

Revenue for the fourth quarter was $10.76 billion, up 5.1% year over year from $10.23 billion. For full year 2017, revenue rose 8.3% to $40.6 billion.

Total net customer additions in the quarter were 1.9 million, bringing T-Mobile's total customer count to 72.6 million. Of those total additions, branded postpaid phone net customer additions were 891,000 in quarter. For the full year, branded postpaid phone net customer additions were 2.8 million.

Looking ahead, T-Mobile expects branded postpaid net customer additions of 2.0 million to 3.0 million.