United States

Customer development

Branded customers

At September 30, 2020, the United States operating segment (T‑Mobile US) had 100.4 million customers, compared to 67.9 million customers at December 31, 2019. Net customer additions were 4.1 million for the nine months ended September 30, 2020, compared to 3.5 million net customer additions for the nine months ended September 30, 2019, due to the factors described below.

Postpaid net customer additions were 3.9 million for the nine months ended September 30, 2020, compared to 3.2 million postpaid net customer additions for the nine months ended September 30, 2019. The increase resulted from higher postpaid other net customer additions primarily due to higher gross additions from connected devices primarily due to educational institution additions and lower churn, partially offset by lower switching activity in the industry from reduced store traffic due to temporary retail store closures arising from the coronavirus pandemic. This increase was partially offset by lower postpaid phone net customer additions primarily due to lower switching activity in the industry from reduced store traffic due to temporary retail store closures arising from the coronavirus pandemic and an increase in churn from the inclusion of the customer base acquired in the Sprint Merger.

Prepaid net customer additions were 247 thousand for the nine months ended September 30, 2020, compared to 262 thousand prepaid net customer additions for the nine months ended September 30, 2019. The decrease was primarily due to lower switching activity in the industry from reduced store traffic due to temporary retail store closures arising from the coronavirus pandemic, partially offset by lower churn.

Development of operations

Total revenue

Total revenue for the United States operating segment of EUR 44.0 billion in the nine months ended September 30, 2020, increased by 48.6 percent, compared to EUR 29.6 billion in the nine months ended September 30, 2019. In U.S. dollars, T‑Mobile US’ total revenues increased by 49.0 percent year-over year primarily due to increased service revenues as well as increased equipment revenues. The components of these changes are described below.

Service revenues increased for the nine months ended September 30, 2020 primarily due to higher average postpaid customers driven by customers acquired in the Sprint Merger, the growing success of new customer segments and rate plans as well as continued growth in existing and new markets, growth in other connected devices, primarily due to growth in educational institution customers, as well as wearable products. The increase in service revenues was also driven by higher postpaid phone ARPU and higher roaming and other service revenues primarily from the inclusion of wireline operations acquired in the Sprint Merger.

Equipment revenues increased for the nine months ended September 30, 2020 primarily due to the Sprint Merger including increases in lease revenues due to a higher number of customer devices under lease, an increase in revenues primarily related to the liquidation of returned devices, and an increase in equipment sales from leased devices, primarily due to an increase in purchased leased devices. In addition to these revenues primarily due to the Sprint Merger, there was an increase in device sales revenue, excluding purchased leased devices.

Other revenues were essentially flat for the nine months ended September 30, 2020.

Adjusted EBITDA AL, EBITDA AL

In euros, adjusted EBITDA AL increased by 83.5 percent to EUR 15.5 billion in the nine months ended September 30, 2020, compared to EUR 8.4 billion in the nine months ended September 30, 2019. The adjusted EBITDA AL margin increased to 35.1 percent in the nine months ended September 30, 2020, compared to 28.4 percent in the nine months ended September 30, 2019. In U.S. dollars, adjusted EBITDA AL increased by 84.2 percent during the same period. Adjusted EBITDA AL increased primarily due to higher service revenues and equipment revenues as discussed above. These increases were partially offset by increases in expenses primarily due to the Sprint Merger including those associated with backhaul agreements, other tower expenses, employee-related and benefit-related costs primarily due to increased headcount, external labor and professional services, lease and rent costs, and advertising. Additional increases in expenses primarily due to the Sprint Merger include those associated with costs related to the liquidation of returned devices, leased device cost of equipment sales, primarily due to an increase in purchased leased devices, repair and maintenance costs, and legal-related expenses for risk provisioning and commitments. In addition to these costs primarily due to the Sprint Merger, were increases in expenses primarily due to the continued build-out of our nationwide 5G network, costs associated with our restructuring activities, device cost of equipment sales, excluding purchased leased devices, higher cost devices used for device insurance claims fulfillment, bad debt primarily due to the estimated macro-economic impacts of the coronavirus pandemic, and commission expense primarily due to higher gross customer additions. The impact from commission costs capitalization and amortization, including a benefit from new costs capitalized as result of the Sprint Merger, reduced adjusted EBITDA AL by USD 69 million in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

EBITDA AL for the nine months ended September 30, 2020, included special factors of EUR -1.4 billion compared to special factors of EUR -0.4 billion for the nine months ended September 30, 2019. The change in special factors was primarily due to an increase of EUR 0.6 billion in Merger-related costs including transaction costs, including legal and professional services related to the completion of the Merger; EUR 0.6 billion of restructuring costs, including severance, store rationalization and network decommissioning; and integration costs to achieve synergies in network, retail, IT, and back office operations. Also, EUR 0.4 billion in third-party commissions and cleaning-related expenses associated with the coronavirus pandemic, EUR 0.2 billion postpaid billing system disposal, and EUR 0.1 billion in accelerated amortization of right-of-use assets. These increases were partially offset by the EUR 0.3 billion transaction fee received from SoftBank. Overall, EBITDA AL increased by 76.0 percent to EUR 14.1 billion in the nine months ended September 30, 2020, compared to EUR 8.0 billion in the nine months ended September 30, 2019, due to the factors described above, including special factors.

EBIT

EBIT increased to EUR 5.9 billion in the nine months ended September 30, 2020, compared to EUR 4.3 billion in the nine months ended September 30, 2019. In U.S. dollars, EBIT increased by 37.3 percent during the same period primarily due to higher EBITDA AL. In U.S. dollars, depreciation and amortization increased by 98.2 percent primarily due to higher depreciation expense from assets acquired in the Sprint Merger, excluding leased devices, and network expansion from the continued build-out of our nationwide 5G network, higher depreciation expense on leased devices resulting from a higher total number of customer devices under lease, primarily from customers acquired in the Sprint Merger, and higher amortization from intangible assets acquired in the Sprint Merger.

Cash capex

Cash capex increased to EUR 7.1 billion in the nine months ended September 30, 2020, compared to EUR 5.3 billion in the nine months ended September 30, 2019. In U.S. dollars, cash capex increased by 34.5 percent primarily due to network integration related to the Sprint Merger and the continued build-out of our nationwide 5G network and an increase in spectrum purchases.