The last of the six nationwide wireless operators reported second-quarter results last week as German telecommunications giant Deutsche Telekom AG released results for T-Mobile USA Inc. that showed a dramatic drop-off in customer growth compared with the first three months of this year, but improvements in both customer churn and total revenues.
DT said its U.S. operations added 606,000 customers during the second quarter of this year, which was well below the 921,000 subscribers the carrier added during the first quarter of this year, but ahead of the 525,900 customers T-Mobile USA signed up during the second quarter of 2002. The carrier noted a net gain of 652,000 postpaid subscribers during the second quarter was offset by the loss of 46,000 prepaid customers during the quarter.
While T-Mobile USA’s customer growth results were less than half of Verizon Wireless’ industry-leading 1.3 million net subscriber additions during the second quarter, T-Mobile USA still led its four remaining nationwide competitors and finished the quarter snuggled up closely behind Nextel Communications Inc. in total customers with more than 11.4 million subscribers.
Analysts blamed T-Mobile USA’s relatively slow customer growth on a drop in gross customer additions and resulting loss of market share as well as the carrier’s focus on adding higher value post paid subscribers.
Despite the drop-off in customer growth, T-Mobile USA continued to report improvements in customer churn, which dropped from 4.4 percent during the second quarter of 2002 and 3.01 percent during the first quarter of this year to 2.96 percent during the second quarter. The carrier said it was the first time it has reported a sub-3 percent blended churn rate.
T-Mobile USA also reported an increase in average revenue per user from $49 during the second quarter of 2002 and $50 during the first quarter of this year to $53 during the recently completed second quarter, as well as an increase in customer usage from 710 minutes of post-paid use per month during the first quarter of the year to 745 minutes of use during the second quarter.
“We are the only national carrier that has meaningfully grown ARPU in the last year, which we have done through higher customer usage and greater data contribution,” said Robert Dotson, president and chief executive officer of T-Mobile USA.
Financially, T-Mobile USA reported a 14-percent spike in total revenues from $1.8 billion during the first quarter of this year to $2 billion during the second quarter. T-Mobile USA also said it increased capital expenditures from $378 million during the first quarter to $402 million in the second quarter, which the carrier said was targeted at enhancing the capacity and quality of its existing network, which covered 224 million potential customers at the end of the second quarter.
With continued strong results from its U.S. operations, DT’s management told reporters that the company did not expect any consolidation activity in the short term despite continued reports that DT has been talking with both AT&T Wireless Services Inc. and Cingular Wireless L.L.C. about a possible merger.
“Consolidation in the U.S. mobile industry will not occur in the short timeframe,” DT chief executive Kai-Uwe Ricke told analysts.
Ricke added that T-Mobile USA is expected to post positive cash flow after interest for the full year beginning in 2005.
While T-Mobile USA was posting strong nationwide results, regional operator UbiquiTel Inc. posted second-quarter numbers showing a slight improvement from what has been a difficult year for a number of Sprint PCS’ affiliates.
UbiquiTel said it added 17,800 net customers during the quarter, compared with 15,700 subscriber additions the carrier reported during the second quarter of 2002. The improved customer growth was attributed to a reduction in customer churn from 4.1 percent last year to 2.9 percent this year and a slight increase in gross customer additions from 41,000 subscribers last year to 42,000 subscribers this year.
UbiquiTel’s management noted that it added 2,100 customers from Sprint PCS’ Virgin Mobile USA L.L.C. joint venture during the second quarter, which began offering services in UbiquiTel’s markets in mid-April.
UbiquiTel also reported stable year-over-year ARPU of $58, a reduction in cash cost per user from $69 last year to $46 this year and a decrease in cost per gross addition from $456 during the second quarter of 2002 to $452 this year.
Total revenues also increased from $53.6 million last year to $66 million during the second quarter of 2003, while net losses dropped from $31.1 million last year, a loss of 38 cents per share, to $8.9 million this year, a loss of 11 cents per share.
UbiquiTel’s management added that following its recent agreement to cede the buildout of its Montana markets to Sprint PCS as part of its deal with Qwest Communications International Inc., UbiquiTel expects reduced capital expenditure requirements that will allow the affiliate to generate positive free cash flow beginning in 2004.
The carrier said there were approximately 35,000 Qwest Wireless customers in its markets at the end of the second quarter and that it was confident its network could handle the additional capacity requirements once those customers are transitioned to its network early next year.
