T-Mobile USA Inc. posted first-quarter customer growth second only to Verizon Wireless and more than double its next closest competitor, reaffirming claims that once consumers could port their phone numbers, they would gravitate to carriers offering the highest perceived quality or greatest value wireless service.
T-Mobile USA said it added a record 1.174 million customers during the first three months of the year, topping the 921,000 customers the carrier signed up during the first quarter of 2003, as well as the 1 million-plus subscribers T-Mobile USA added during the fourth quarter of last year. Postpaid customers accounted for most of the growth, and 89 percent of its 14.3 million total subscriber base were on contracts at the end of the first quarter, the carrier said.
T-Mobile USA’s customer growth dwarfed most of its larger competitors, including Cingular Wireless L.L.C.’s 554,000 net subscriber additions, Sprint PCS’ 414,000 direct net new customers and AT&T Wireless Services Inc.’s disappointing loss of 367,000 subscribers.
With nearly 1.4 million net additions, only Verizon Wireless managed to trump T-Mobile USA’s growth. The two carriers accounted for three-fourths of subscribers added by the nation’s eight largest carriers during the first three months of the year.
“We started off the year with record-setting growth, validating both the strength of the U.S. market and T-Mobile’s service proposition,” said Robert Dotson, president and chief executive officer of T-Mobile USA.
Roe Equity Research L.L.C. telecommunications industry analyst Kevin Roe said he was shocked by T-Mobile USA’s customer growth during the quarter. Roe said he was expecting about 800,000 net additions, and that even the most aggressive estimates forecast the carrier might sign-up 1.1 million new customers.
“The growth was amazing,” Roe said. “It’s also impressive historically as T-Mobile actually added more customers during the first quarter than the preceding fourth quarter, which is unlike anything I can remember.”Boosting the carrier’s strong customer growth was its continued ability to rein in customer churn, which dropped from 3.2 percent during fourth-quarter ’03 to 3 percent during the first quarter, despite what the carrier claimed was a relatively high number of customers reaching their one-year contract expirations.
Analysts also attributed T-Mobile USA’s strong customer growth to the carrier’s aggressive marketing efforts, attractive rate plans and a steady influx of wireless local number portability-related subscriber additions. While T-Mobile USA said only that it was a net beneficiary of WLNP, analysts have predicted the carrier likely would see an increase in customer growth from the federal mandate, which was implemented Nov. 24 in the nation’s top 100 markets. Consumers have often cited T-Mobile USA as the value leader among nationwide operators.
“There will be two winners with LNP,” predicted Yankee Group telecommunications analyst Roger Entner late last year. “The carrier that is perceived as the quality leader, which is Verizon Wireless. And the carrier that is perceived as the value leader, which is T-Mobile.”
T-Mobile USA’s value perception has had little effect on the carrier’s revenues, which-helped by 3.5 million customers added during the past 12 months and a slight increase in average revenue per user from $53 during the first quarter of 2003 to $54 this year-lifted total revenues from $1.8 billion during the first quarter of 2003 to $2.6 billion this year. The carrier noted that data services accounted for 4.5 percent of postpaid revenues during the quarter, compared with 3.5 percent in fourth-quarter 2003.
T-Mobile USA also managed to cut net losses from $216.2 million during the first quarter of 2003 to $157.2 million this year, despite increases in the cost per gross addition from $303 to $326 and capital expenditures from $378 million last year to $599 million this year.
