Prepaid, connected devices provide glimmer of hope for T-Mobile USA

T-Mobile USA Inc. (DTEGY) continued to bleed customers during the first three months of the year as the proposed acquisition by AT&T Inc. lingers over the company’s future.
T-Mobile USA said it lost 99,000 customers during the first quarter, including a whopping 471,000 postpaid subscribers. Those losses were partially offset by the gain of 372,000 prepaid and wholesale partners during the quarter as well as the addition of 192,000 “connected devices” that are included in its postpaid numbers.
The overall customer losses were higher than the 77,000 customers T-Mobile USA lost during the first quarter of 2010, which included the loss of 118,000 contract customers and a gain of 41,000 prepaid and wholesale subscribers.
T-Mobile USA said it ended the quarter with 33.63 million total customers on its network, including 2.1 million connected devices and 3.2 million wholesale subscribers.
The carrier’s customer slide was evident in its customer churn results, which while dropping sequentially from 3.6% during the fourth quarter of last year to 3.4% this year, was still up from the 3.1% posted during the first quarter of 2010. Postpaid churn was the main driver for the increase having climb from 2.2% in 2010 to 2.4% this year, while prepaid churn managed to improve slightly from 6.8% to 6.7% over the same time period.
“The success in our data business has been driven by our 4G network message, our compelling 4G device offerings and our attractive data plans; however, we still have challenges facing our business as evidenced by high contract churn and contract customer losses in the first quarter of 2011,” said Philipp Humm, President and CEO of T-Mobile USA.
Data services did help T-Mobile USA stabilize revenues as average revenue per user remained consistent year-over-year at $46 despite falling voice revenues. Postpaid ARPU managed to increase from$51 during the first quarter of 2010 to $52 this year, while prepaid also inched up from $18 in 2010 to $19 this year. Data services accounted for 29% of blended ARPU, or $13.10, during the quarter, an increase from $10.90 or 24% of blended ARPU during the first quarter of 2010.
That flat year-over-year ARPU was also evident in the carriers overall service revenues, which totaled $4.63 billion during the first quarter of 2010 and 2011, while total revenues slipped from $5.28 billion in 2010 to $5.16 billion this year. The carrier attributed the decline to slower handset sales.
T-Mobile USA managed to cut its cost per gross addition from $310 during the first quarter of 2010 to $300 this year, which the carrier attributed to lower commission expenses and a shift in customer growth to wholesale partners and connected devices. Cash cost per user did tick up from $23 to $25 that was attributed to higher handset subsidies tied to greater smartphone sales.
The carrier also increased capital expenditures during the quarter from $666 million in 2010 to $749 million this year, which T-Mobile USA said was connected to expanding network coverage and installing the 42 Mbps upgrade to its HSPA+ network.
The drop in total revenues combined with the slight increase in expenses dropped T-Mobile USA’s net income from $362 million during the first quarter of 2010 to $114 million this year.
Despite the difficult quarter and impending uncertainty surrounding its future, T-Mobile USA remained defiant in its market position.
“The first quarter shows a mixed picture with positive trends in the development of data ARPU,” noted Ren