T-Mobile USA Inc. recorded a banner 2005 and posted the best overall performance of T-Mobile International’s wireless subsidiaries, while parent company Deutsche Telekom AG’s full-year profit for the year showed solid gains and the company declared its largest ever dividend. However, DT’s fourth-quarter profits plunged 43 percent compared to the same quarter in 2004.
Some of DT’s European wireless operators struggled, but T-Mobile USA led the pack with $14.1 billion in net revenue for 2005, up 28 percent from the prior year; customer growth of more than 25 percent year-over-year, ending 2005 with 21.7 million subscribers; and adjusted earnings before interest, taxes, depreciation and amortization of $2.4 billion, up 60 percent from 2004. However, fourth-quarter average revenue per user for T-Mobile USA was $52, down $3 from the fourth quarter of 2004. The company said that a decrease in prepaid ARPU, an increasing percentage of prepaid customers in its base and a decline in postpaid ARPU contributed to the slip.
“Our U.S business is currently the key growth engine driving mobile communications,” said Kai-Uwe Ricke, chairman of DT. “T-Mobile USA is a continuing success story of which we can rightly be proud. This is precisely why we are also preparing to participate in the auction for additional spectrum in the USA.”
Ricke went on to say that T-Mobile USA would use any additional spectrum acquired during the upcoming advanced wireless services auction scheduled for June to build a next-generation mobile network, although he declined to estimate how much Deutsche Telekom was willing to put into the spectrum auction and subsequent buildout. However, DT executives said last year that the company has set aside $2 billion for T-Mobile USA’s spectrum purchases.
For all of DT’s international wireless subsidiaries, net revenues totaled $35.1 billion, an increase of 11 percent year-over-year; the operator counted 86.6 million customers across its wireless subsidiaries at the end of 2005. Revenue from data services, not including text messaging, grew 43 percent for the T-Mobile group to just over $1 billion. However, the carrier is stumbling in Germany and the United Kingdom, where net revenues and adjusted EBITDA for the year were down and ARPU also dropped in year-over-year comparisons. DT announced last November that it would slash 32,000 jobs during the next three years in an effort to trim costs, with most cuts coming in its German T-Com division.
“Competition in our markets has become tougher-and I mean much tougher,” said Ricke.
Analysts agreed. Dan Bieler, research director at Ovum Germany, commented that even though T-Mobile USA’s growth remains solid, “there are signs that competitive pressure is building, with ARPUs in dollar terms declining by 5.7 percent. Moreover, there are significant investments in the U.S., such as the acquisition of additional spectrum and the construction of next generation networks.”
Bieler added that “competitive pressure affects most other markets for T-Mobile as well. We believe that further mobile termination rate reductions and increasing network capacity through the introduction of 3G networks will keep the pressure on revenues.”
T-Mobile USA released its customer numbers in January. The fourth-largest U.S. operator had its best-ever customer additions of 1.4 million subscribers during the quarter; about one-third of those, or 34.5 percent, were prepaid customers. The carrier managed to reduce its fourth-quarter combined churn to 2.9 percent from 3.1 percent in 2004; postpaid churn was 2.3 percent for the quarter, improved from 2.6 percent at the same time last year, while prepaid churn held steady at 6.6 percent. T-Mobile USA wrapped up 2005 with a customer base that is 85-percent postpaid.
