T-Mobile US Inc. said its nearly year-old merger with Sprint Corp. will saddle the combined company with more costs this year as its engineers shift more subscribers onto a single network.
The Bellevue, Wash., company said it would spend $2.5 billion to $3 billion before taxes folding the stores, employees and network infrastructure it acquired from its one-time competitor into the new business. The company spent about $1.9 billion on such expenses last year.
The added burden pushed T-Mobile’s fourth-quarter net income to $750 million, or 60 cents a share, compared with a year-earlier result of $751 million, or 87 cents a share. The latest quarterly result included $686 million of merger costs. Revenue jumped to $20.3 billion from $11.9 billion a year earlier, before the company had absorbed Sprint.
T-Mobile closed its purchase of smaller competitor Sprint last year after a two-year legal campaign that culminated in a federal court ruling in its favor.
The merger left the U.S. with three major carriers that have spent the past year fighting each other and a collection of smaller brands for new customers. T-Mobile in January reported a net gain of 824,000 postpaid phone connections in the fourth quarter. Rival AT&T Inc. said it added 800,000 of those prime customers. Verizon reported a net gain of 279,000 postpaid phone connections
T-Mobile also continued adding devices other than cellphones, including tablet computers and internet hot spots, to its cellular network. It reported a net gain of 794,000 such postpaid connections in the fourth quarter.
The carrier said on Thursday that it had made more progress integrating Sprint’s customer base, with 25% of Sprint postpaid customer traffic already flowing over T-Mobile’s systems, representing about 4 million subscribers.
T-Mobile executives are counting on versatile midrange wireless airwave licenses gained from the Sprint purchase to fuel their company’s growth for years to come. Engineers have already put some of the valuable spectrum to work carrying ultrafast fifth-generation, or 5G, wireless service across much of the country.
Executives said the added cost of bringing the two companies under one roof would be more than covered by the future cost savings from a simpler organization. They also pointed to faster wireless downloads as a reason the company’s revenue will keep improving.
“We’ve competed mostly on price in the past, if we’re honest,” Chief Executive Mike Sievert said during a live streamed conference. “Now, we have a premium product.”