T-Mobile USA's Q4 results impacted by prepaid

T-Mobile USA Inc. posted surprisingly strong fourth quarter 2009 results today bolstered by the carrier’s continued appeal to prepaid customers.
The industry’s No. 4 operator said it added 371,000 customers to its network during the final three months of 2009, which was down from the 621,000 it added during the fourth quarter of 2008, but a vast improvement compared with the 77,000 customers it lost during the third quarter of last year. T-Mobile USA noted the growth was solely based on its prepaid and wholesale operations, which combined added 488,000 new customers to the carrier’s network and was offset by the loss of 117,000 contract customers during the quarter.
Customer churn remained steady year-over-year at 3.3%, with churn from contract customers inching up from 2.4% in 2008 to 2.5% during the fourth quarter of 2009, while prepaid churn decreased sequentially from 7.4% during the third quarter to 6.8% in the fourth quarter of last year.
During the fourth quarter, T-Mobile USA revamped its rate plans to place more emphasis on its no contract, prepaid offerings.
T-Mobile USA noted that prepaid customers accounted for 21% of its customer base at the end of the year, an increase from the 18% at the end of 2008. Wholesale customers, or those subscribers on its network that sign up for service through a non-T-Mobile USA branded outlet, accounted for two million of the carrier’s 33.8 million total subscribers.
Average revenue per user dropped $4 year-over-year to $46, which the carrier attributed to contract customers moving to lower ARPU unlimited plans and fewer customers on its prepaid FlexPay plans. ARPU contributions from data services continued to increase rising nearly $1 from $9.30 during the fourth quarter of 2008 to $10.20 last year. T-Mobile USA’s data ARPU’s continue to trail its larger rivals, which typically post data ARPU results in excess of $15 per month, per subscriber.
The modest customer growth combined with falling ARPUs hit T-Mobile USA’s revenues, which dropped from $5.72 billion during Q4 2008 to $5.41 billion last year.
Operating expenses were down slightly year-over-year from $4.9 billion in 2008 to $4.8 billion last year with costs per gross customer addition increasing from $270 in 2008 to $300 this year, while cash cost per user per month dipped from $25 to $22. Capital expenditures also dropped from $895 million during Q4 2008 to $697 million last year, though T-Mobile USA said its HSPA+-based 3G network expanded to cover 205 million potential customers at the end of 2009.
The savings were not enough though as the carrier’s net income slipped from $483 million during the fourth quarter of 2008 to $306 million last year.