T-Mobile US (TMUS) released its first earnings report today as a public company. The company was formed by the combination of T-Mobile USA (which was 100% owned by Deutsche Telekom) and MetroPCS. That merger was finalized after the first quarter ended, so today’s Q1 earnings report includes results for T-Mobile USA only.
For the first time in four years, the company reported branded customer growth, with 3,000 branded net customer additions. Its prepaid business grew for the 7th straight quarter, with 202,000 branded customer additions. At the end of March, T-Mobile USA had 34 million total customers, up 579,000 from December.
Capital expenditures were $1.1 billion as the company continued to build out its LTE network, which it says now covers 7 major U.S. metropolitan areas. T-Mobile says it modernized approximately 16,000 sites with HSPA+ on 1900 MHz spectrum during Q1, and that its HSPA+ network now covers 170 million people.
First quarter revenue was $4 billion, down from $4.4 billion in the year-ago quarter. Earnings before interest, depreciation and taxes were $12.5 billion, down from $16 billion in the year-ago quarter. Net income was $107 million, down from $200 million in the first three months of 2012.
The company blamed service revenue declines for its lower earnings. In a statement, T-Mobile said that “the continued customer adoption of the Value and Simple Choice plans, which represented 36% of T-Mobile USA’s branded postpaid customer base at the end of the first quarter of 2013, up from 30% as of December 31, 2012, contributed to service revenue declines in the quarter of 9.9% year-over-year and 3.0% sequentially.” The company noted that declines in service revenue were partially offset by higher equipment revenue.
The recent addition of the iPhone 5 to T-Mobile USA’s smartphone portfolio could be a game changer for the carrier during the remainder of 2013, especially since the iPhone generates equipment revenue as well as service revenue for T-Mobile. Today the company said that it has already sold half a million iPhones and that it has attracted another 100,000 iPhone users who have brought their devices to T-Mobile from other carriers.
T-Mobile of course offers the iPhone without a traditional contract, but customers who get the phone from T-Mobile have to make monthly payments for two years, which are separate from the service charges. At the end of two years, the customer owns the phone. Leaving before two years have passed requires a customer to pay the remaining “balance” if they want to buy the phone and take it with them.
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