T-Mobile USA’s attempt to retain contract customers continued to falter during the recent third quarter with the nation’s No. 4 operator reporting a loss of 492,000 postpaid customers. The drop was an improvement compared with the 557,000 contract customers the carrier lost during the previous quarter, but was up from the 389,000 postpaid customers lost during the third quarter of 2011. Most telling is that all three reporting periods showed customer losses.
T-Mobile USA noted the contract losses were due to slowing gross customer additions, adjustments to its credit checks and the launch of Apple’s latest iPhone 5, which T-Mobile USA does not offer, during the quarter.
While contract customers continue to flee T-Mobile USA, the carrier’s prepaid and wholesale operations continue to prosper. The operator reported 365,000 direct prepaid net additions during the quarter, which was a 44% year-over-year increase and helped stem T-Mobile USA’s direct customer losses to just 127,000 subscribers during the quarter. This was a slight improvement from the 135,000 direct net customer losses for the third quarter of 2011.
Wholesale operations also continued to show growth, with T-Mobile USA’s machine-to-machine and mobile virtual network operator offerings adding 287,000 net connections during the quarter, which was a 10% increase compared with the third quarter of 2011.
Overall, T-Mobile USA ended the last quarter with 160,000 net connections and a customer base of 33.3 million connections.
T-Mobile USA’s reliance on no-contract customers should receive a spike if its pending acquisition of MetroPCS reaches fruition. However, MetroPCS, which relies exclusively on no-contract customers, reported a loss of more than 312,000 customers during the third quarter after having posted a net gain the previous year. For the year, MetroPCS has lost more than 366,000 prepaid customers after having gained more than 1 million through the first nine months of 2011.
Analysts have noted that a combined T-Mobile USA/MetroPCS could become a powerhouse in the no-contract space, with Sprint Nextel seen as the most likely to suffer the effects due to its reliance on its Boost Mobile and Virgin Mobile services to offset continued postpaid losses through its iDEN operations.
Customer churn results showed the impact of slowing gross contract customer additions as direct postpaid churn actually dropped year-over-year from 2.6% in 2011 to 2.3% this. Overall direct churn improved from 3.2% last year to 3.1% this year, though sequentially it was up from the 2.9% reported during the second quarter of this year.
Financially, customers spent less money per month at T-Mobile USA, contrary to what was being reported at its larger rivals. Blended average revenue per user dropped more than 7% year-over-year to $42.78 during the third quarter. That result was due to a 3.3% dip in postpaid ARPU that fell to $56.59 during the most recent quarter, despite a 10% increase in contributions from data services that hit $19.45 during the third quarter of 2012. The carrier noted that 57% of its postpaid customers were using smartphones at the end of the quarter, up from 44% at the end of the third quarter last year.
The drop in ARPU and defection of high-value postpaid customers hit T-Mobile USA’s top line as total revenues slipped 6.4% year-over-year to $4.9 billion. An $8.1 billion impairment charge related the pending MetroPCS deal ballooned the carrier’s operating expenses during the quarter to nearly $12.5 billion. This in turn hit T-Mobile USA’s bottom line, with total losses exploding from a return of $275 million last year to a loss of $7.8 billion this year. The carrier did note that without that one-time charge, net income would have remained basically flat year-over-year.
Highlighting its current network evolution, T-Mobile USA reported a 33% sequential increase in capital expenditures during the quarter, adding that capex is also set to increase year-over-year during the fourth quarter. The $4 billion network upgrade plan will see the carrier install new equipment at 37,000 cell sites and re-farm spectrum in the 1.9 GHz band currently used for its GSM-based services to launch HSPA+ services, which would then allow for the re-farming of its 1.7/2.1 GHz spectrum currently used for HSPA+ services to bolster the spectrum gleaned from the merger break up to launch LTE in the 1.7/2.1 GHz band.
Bored? Why not follow me on Twitter?
