T-Mobile USA’s customer retention efforts continued to struggle during the second quarter as the nation’s No. 4 operator posted growing subscriber losses and declining revenues.
During the quarter T-Mobile USA said it lost a total of 205,000 customers across its operations, more than four-times the 50,000 customers lost during the second quarter of 2011. The result was also a turnaround from the 187,000 customers the carrier gained during the first quarter of this year.
Direct postpaid customer losses drove the overall trend as the carrier said it lost 557,000 contract customers during the quarter. This was a slight increase from the 536,000 contract customers it lost during the second quarter of last year and pushed its total contract customer losses to 2.163 million subscribers over the past 12 months.
The carrier’s prepaid offerings continued to be a bright spot as T-Mobile USA said it added 227,000 subscribers through its branded service, which was down slightly sequentially, but a vast improvement over the 71,000 prepaid customers it lost during the second quarter of last year. T-Mobile USA has managed to attract 950,000 direct prepaid customers over the past year and was serving nearly 5.3 million no-contract customers at the end of the second quarter.
T-Mobile USA also posted small gains in its machine-to-machine and mobile virtual network operator segments, adding 95,000 and 30,000 connections respectively during the second quarter. However, both of those results were down significantly year both sequentially and year-over-year.
T-Mobile USA blamed its MVNO and M2M operations for its overall customer losses for the quarter, citing fewer gross customer additions through its MVNO channels and higher churn from its M2M services. For its branded offering, T-Mobile USA noted that it changed credit requirements that impacted gross customer additions and cited fewer new handset launches during the quarter.
T-Mobile USA’s customer losses were also in stark contrast to the customer gains posted by its larger rivals during the second quarter. AT&T Mobility added 1.266 million net connections during the second quarter; Verizon Wireless posted just under 1.2 million direct customer additions; and Sprint Nextel managed to add 283,000 total connections to its network.
The slowdown in gross customer additions was evident in the carrier’s churn results, which improved across the table. Direct customer churn dipped from 3.2% during the second quarter of 2011 to 2.9% this year, with contract churn falling from 2.6% to 2.1% and prepaid churn dropping from 6.6% to 6%.
While most of its rivals posted strong average revenue per user growth during the quarter, T-Mobile USA posted a dip in blended ARPU dropping from $45.86 during the second quarter of 2011 to $43.88 this year. Postpaid ARPU was basically flat year-over-year at $57.35, while prepaid ARPU surged 13.6% to $26.81. However, the difference in the mix of customers split between postpaid and prepaid operations impacted overall ARPU.
T-Mobile USA did post a 12.9% increase in data ARPU during the quarter to $17.21, or roughly 40% of overall ARPU. The carrier also rolled out more aggressive prepaid data plans during the quarter.
The dip in its overall customer base and slowing ARPU results for the quarter hit the carrier’s bottom line, with total revenues dropping 3.3% year-over-year to $4.883 billion for the quarter. Despite trimming expenses, net income dropped slightly from $207 million during the second quarter of 2011 to $175 million this year.
A portion of the lower expenses came from the carrier’s capital expenditures budget as T-Mobile USA reported a 21.7% drop in capex during the second quarter, but noted its recently announced $4 billion network modernization program will result in increased capex spending for the second half of the year.
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