Q3 '26 Earnings: Verizon and T-Mobile, Cable's Changing Landscape

Full Transcript

Don Kellogg

Hello and welcome to the 320th episode of The Week with Roger, a conversation between analysts about all things telecom, media and technology by Recon Analytics. I'm Don Kellogg, and with me as always is Roger Entner. How you doing, Roger?

Roger Entner

I'm okay. How are you?

Don Kellogg

I'm doing okay. I had a little bit of internet outage this morning, but back online and ready to rock. So it's part two of our earnings recap. We had Verizon and T-Mobile this week. So who do you want to talk about first?

Roger Entner

Well, let's go down how they actually reported. Let's start with Verizon.

Don Kellogg

Yeah.

Roger Entner

Dan promised us to turn things around, and Dan is turning things around. I always say numbers and facts don't make decisions, people make decisions. If you know the people, you know the outcome, right? It's the same, more or less the same company, fewer people, and the fewer people created better results than under the previous administration. That just shows you how important leadership is.

Don Kellogg

Mm.

Roger Entner

You know, they changed the way they go to market. They launched Simplicity. We always said people liked Verizon as a carrier. People didn't like My Plan. And look, they started offering Simplicity next to My Plan, and not only did net adds go up — that was never the problem, right, net adds — you just added an additional line, but now they added 137,000 postpaid accounts.

Don Kellogg

Which is huge. I mean, we've been on them for years about this. They grow lines, but they lose accounts. They grow lines, but they lose accounts, and there's only so much you can milk out of your existing customer base.

Roger Entner

Yes. And Dan nicely said every one of these lines and accounts made revenue, which by implication means the old additional lines did not make revenue. And they got their churn down because they're not raising prices on the existing customers. You know, sometimes it can be that easy, right? If you want to nitpick on something, they had fewer connected devices. I don't think anybody cares.

Don Kellogg

I mean, those were always kind of like — I don't think anybody cares, right? Like calories anyway, right?

Roger Entner

Yes, they were light calories, if not empty.

Don Kellogg

Right.

Roger Entner

Really good job. Our power went down, but I would expect this because the Simplicity plan, when you look at it, it's like aimed at one and two lines. And it's aimed at no subsidy. And so this is probably BYOD, one and two lines — of course our power goes down. You can't have everything. And so they did really, really well here. You know, when you look at the guidance for the end of year, it's 400,000, last year they did 500 and change. They know how to get to 400,000. So they're going to beat and probably raise, just like T-Mobile usually does their number. You know, it's funny how quickly a leadership change filters through the organization.

Don Kellogg

Yeah, and it's good to see Verizon back to growth, right?

Roger Entner

Well, we want everybody to be growing, right? There's growth to be had. And I think in this market, even though our friends on Wall Street are all doomsaying, especially with Starlink, right? Starlink is the big overhang here. They had really strong numbers and then they sold off, because I think there were rumors that Verizon might do a deal with Starlink. And then they were very blunt in saying like, no way, no how. And so they sold off — it was like it was nothing about what they actually did, it had all to do with the imagination. All the carriers had a really horrible time because of the news that they're going to build — we said this for what, a year. And so it's more like fear, uncertainty, and doubt, and they can't measure that. You know, our colleague Gareth Toche is about to publish our forecast on what we think that Starlink will come in with, and it's not that bad. How about this? I view Starlink how I view Walmart. Walmart, from like the 50s to what, the 80s, maybe even 90s — the number one competitor of Walmart was small rural mom-and-pops, and they wiped them out. The ones who are going to feel the most impact by Starlink are the small rural telcos.

Don Kellogg

Yeah, it's going to be all the little WISPs and telcos, right?

Roger Entner

Yes, they are going to go through a cataclysmic—

Don Kellogg

Extinction event.

Roger Entner

Extinction event. And you have a really sophisticated player — as we said before, Starlink as of right now is like FWA-like speeds with fiber-like reliability. That's an incredible base. Talking about incredible base — how about T-Mobile. It's the fastest growing wireless carrier again, or at least M&O, 274,000 postpaid net accounts, down from 396 a year ago.

Don Kellogg

Yeah, I mean we're starting to see churn creeping up a little bit, right, which is not surprising because there were some, which we also called for, right?

Roger Entner

Yep, yep.

Don Kellogg

There's some re-rating going on. I know I got re-rated personally, some of the folks I know did as well. But you know, they're getting rid of those legacy Magenta One plans, and we actually saw that in our data, big dips in terms of satisfaction the month that happened. None of this is surprising, but it's interesting to see kind of the evolution under Srini.

Roger Entner

Well, it's becoming a far more profitable company. And in the end, yes, popularity is important, but we're going to get paid in dollars and cents. And Srini is making the company a lot more profitable. And so investors should be focusing on the dollars and cents and not on the song and dance around it. It's still growing faster than anybody else. Its revenues are growing faster than anybody else. Its profitability is going up more than everybody else. It's just that the level of growth is coming down. And it's also the law of big numbers — rural America, how much can you grow in that, right? And small market rural areas, as they call it, has been their growth engine for so long, and now they're becoming slowly a victim of their own success — all the low-hanging fruit are gone, and the higher-hanging fruit have to be reached. In from the left comes Chris Sambar, who is now in charge of the next growth area, which is business, where under Callie, right, they grew and doubled and did whatever, but from a very, very low base. And T-Mobile, a company of overperformers, has underperformed in business, right? The number one preferred next provider for mobile in business is T-Mobile, and they're nowhere near the share. And so I look at business as that next growth area. You know, and they got an excellent executive there. They just changed out the marketing leadership person — Mo Katibe left, as we read on LinkedIn. They have a great new head for federal, who came in from, surprise surprise, AT&T. And so I think on the business side — and we're probably going to share more on the business side, we have like fantastic data that nobody else has on the business side — we'll have a battle coming up, because also the cable guys can now sell small and medium businesses. And again, they have been woefully underperforming when it comes to mobile, especially in small business. The cable guys on fixed have like 40 to 50% share. In mobile, they can probably put all their customers into a SEC stadium — maybe two, maybe three. Okay, but probably not much more. They also now are going to come in — so 2027. Like a year ago, we talked about 2026 being epic, if you remember. I don't think we've undersold that. 2027 will be another epic year. But a lot of the fireworks that I'm expecting is going to be in the business sector, which is the least understood and the hardest to cover segment of the market. But that's where a lot of fireworks will come in.

Don Kellogg

All right. All in all, a pretty good round of earnings this round, particularly for the M&Os. We still got Charter coming, and I think that'll kind of round things out.

Roger Entner

Yeah. The cable guys are going through, how should I say, a—

Don Kellogg

Realignment.

Roger Entner

Realignment and a reshaping that's going on. You know, we saw — I think it's reported that Comcast realigned their business and had a known, really large layoff. And Charter has bought Cox, it is realigning its workforce. You know, everybody has to return to office. For Charter, that means the office is now in Denver, in Atlanta, or in Stamford. And so you see people leaving the business because even though they're fantastic places, for whatever reason, they'd rather stay where they are.

Don Kellogg

All right. Well, we'll keep covering all the changes as they occur, and we'll talk to you next week.

Roger Entner

Yeah.

Don Kellogg

We'll be exciting.