Why T-Mobile's FWA growth will slow

T-Mobile has been reliably adding around half a million fixed wireless access (FWA) customers to its network every quarter for the past two years. But company officials said that growth ought to taper off in the future.

"Some of the moves, we made to really optimize value creation," explained T-Mobile CFO Peter Osvaldik during the company's quarterly conference call this week, according to Seeking Alpha. Osvaldik said T-Mobile remains on track to reach its goal of 7-8 million total FWA customers by 2025.

"And so I'd probably expect, on a quarterly basis, nets might be in the 400,000 range is really what you need to get to that ambition, while creating more value given some of the promotional pricing that we've now pared back," he said.

Meaning, T-Mobile recently raised the price of its FWA offering by around $10 per month, and company officials hope to eke out more money from each of its new FWA customers by doing so. And that, according to the company, will naturally reduce the company's growth by shrinking the number of new customers to only those who will pay that higher price.

It's an argument that satisfies some financial analysts.

The company "can afford to do so [raise prices] given the strong demand," wrote the financial analysts at TD Cowen in a note to investors after the release of T-Mobile's fourth quarter results. They said they expect T-Mobile's average revenues per user (ARPU) to rise as a result.

Related:T-Mobile leaves the door open to price increases

"They are still well on track to hit the higher-end of its 7-8 million fixed wireless sub target by 2025, with the potential for higher ARPU growth in that segment," added the financial analysts at Wells Fargo in a note to investors after the release of T-Mobile's fourth quarter results.

But others argued there's another factor at play.

The network angle

The change in T-Mobile's FWA growth expectations "is a big deal," wrote the financial analysts at New Street Research in a note to investors after the release of T-Mobile's fourth quarter results. "This marks the beginning of the slowdown that we have been anticipating since the middle of 2023."

They argued that price increases could affect T-Mobile's FWA customer growth, but probably not by 20%. Instead, they believe that T-Mobile's network is beginning to struggle under the weight of all the data generated by those FWA customers. "This will undoubtedly become part of the story as the quarters progress," they noted.

Others agreed. "Part of it simply reflects the reality of approaching the [network] capacity limit for FWA subscribers. Truth be told, for a capacity-constrained service, an excessively promotional price point never made sense in the first place," wrote the financial analysts at MoffettNathanson in a note to investors after the release of T-Mobile's fourth quarter results.

T-Mobile officials, for their part, said the operator's network remains capable of handling all those new FWA customers – including the roughly 10% who use more than 1.2 TB of data per month.

"The network capacity on this fantastic network is outstanding and keeps increasing on 5G as we are pivoting over frequency from our LTE customers over to 5G," T-Mobile's networking chief Ulf Ewaldsson said during the company's conference call. "That's why we can stay ahead of the curve, both with our HSI [high speed Internet] customers being inside that mobile umbrella, but also making sure that we have enough capacity to grow for all the traffic growth on the network."

Nonetheless, T-Mobile officials have acknowledged that the company's 5G networking plan currently accounts for around 7-8 million FWA customers – and that adding more would require an additional investment into more network capacity.

Beyond the goal

According to some financial analysts, T-Mobile may develop ambitions beyond its stated 2025 FWA target of 7-8 million customers. 

"We suspect that through spectrum efficiencies and initial conservatism, that T-Mobile will increase its long term subscriber target by 1-2 million," wrote the financial analysts at TD Cowen.

T-Mobile officials have explained that the company's early FWA strategy is essentially an offshoot of its massive 5G network buildout for smartphone customers. Meaning, the network features no custom equipment for FWA specifically, and can handle both FWA and smartphone customers equally without modifications.

But company officials have in the past hinted that the operator may consider investments into additional, FWA-specific network upgrades so T-Mobile can expand beyond its goal of 7-8 million customers. Those investments could include deploying more spectrum to the service, including millimeter wave (mmWave) spectrum, or deploying additional cell sites. T-Mobile enjoys substantial mmWave spectrum holdings that it has not yet used.

Concurrently, T-Mobile is also pursuing a wired Internet strategy that involves partnering with open access fiber network operators like Tillman FiberCo, SiFi Networks, Intrepid Networks and Pilot Network. Presumably that effort would dovetail in some way with any additional investments T-Mobile makes into FWA.

"The capital allocation methodology that we look at is the same it's always been and will continue to be," T-Mobile CFO Osvaldik explained this week. "What are the highest value-creating opportunities that we can see as a management team?"