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Loose Credit Standards Affecting T-Mobile’s Bottom Line

March 11, 2016 - Written By Alexander Maxham

T-Mobile has had a ton of momentum in the past few years. Not only seeing a ton of subscribers leave their competitors to come to the Uncarrier, but they’ve also seen increases in revenue in profit in the last few quarters. However there is something that is affecting T-Mobile’s bottom line right now, and it may not change any time soon. According to analysts at Wells Fargo, it appears that loose credit standards are affecting their bottom line. Not so much those with bad credit, but giving those with bad credit too much credit. In a research note issues today that when they visited T-Mobile’s headquarters, they walked away “more positively inclined to the story and the overall strategy.” T-Mobile did admit to the analysts that credit policies are still a problem for the carrier.

Noting that the management at T-Mobile have “acknowledged the increase in bad debt expense in 2H15” and that it is something to watch. It also “caused a bit of disruption”. The good thing here is that T-Mobile’s executives did acknowledge that their credit standards do need to be better, or as Wells Fargo Senior Analyst Jennifer Fritzsche put it “they need to tighten the credit standards” primarily with family plan customers. These analysts did state that T-Mobile has a pretty good start to 2016, when talking about subscribers.

T-Mobile did also state to these analysts that if a customer has sub-prime credit, they are required to put down a bigger deposit, than those that are prime. Which is something that T-Mobile has done for quite some time. However that is likely to get even more tight as the tax season approaches and more people have money to buy new phones.

Talking about spectrum, it appears that T-Mobile may have some stuff in store for the transition to 5G in the next few years. Wells Fargo learned that T-Mobile has around 200MHz of 28GHz and 39GHz spectrum to their name. For 5G, this is a pretty important thing. As 5G is pretty much centering around high-band spectrum right now – which will hold more bandwidth and more users than the low-band spectrum. It appears that T-Mobile is set up for the future right now, and the incentive auction later this month could really help them out in the closer future.