Backing up previous hints of a strong quarter, T-Mobile US posted robust operational results for the second quarter, which was its first as a combined entity with MetroPCS.
T-Mobile US said it added 1.1 million net customers during the quarter, a significant turnaround from the loss of 390,000 customers posted by T-Mobile USA and MetroPCS during the second quarter of last year. The latest result also topped net customer additions posted by its larger rivals Verizon Wireless (1 million), AT&T Mobility (632,000) and Sprint (loss of 2 million customers).
Breaking out the growth, T-Mobile US added 688,000 direct postpaid customers; lost 10,000 direct prepaid customers; added 133,000 machine-to-machine connections; and gained 319,000 customers through its wholesale operations. The carrier ended the quarter with just over 44 million total customers on its network, maintaining its position as the nation’s No. 4 carrier, though closing fast on No. 3 Sprint (53.6 million total customers).
T-Mobile US’ strong growth was bolstered by a healthy increase in gross customer additions that offset an increase in customer churn from 2.9% to 3%. Analysts noted that T-Mobile US’ marketing push surrounding its “un-carrier” tag line and a full quarter of offering Apple’s iPhone product line attracted a lot of new customers. T-Mobile US did note that iPhone sales represented just 29% of gross customer additions for the quarter.
However, that elevation in customer churn indicates that the carrier is still having problems hanging onto customers, which could pressure customer growth should gross customer additions begin to soften. T-Mobile US did note that on its direct postpaid side, customer churn was just 1.6% during the second quarter.
Financially, T-Mobile US’ recently implemented no-contract rate plans and the integration of MetroPCS’ flat-rate services hit the carrier’s average revenue per user metric, which dropped nearly $5 year-over-year to $46.67. The carrier’s ARPU had been declining slowly prior to the most recent quarter, but the combination of factors made a strong impact during the latest quarter.
The dip in ARPU was more than offset by the strong customer growth and combination of MetroPCS’ operations as total revenues surged from $4.9 billion during the second quarter of 2012 to more than $6.2 billion this year. MetroPCS had been posting just over $1 billion in revenues per quarter prior to being acquired by T-Mobile US, thus backing that number out of the total still shows a year-over-year increase for the carrier.
While revenues were up, expenses also increased, which dropped T-Mobile US’ net income from a gain of $207 million last year to a loss of $16 million this year. The carrier’s cost per gross customer addition plunged $94 year-over-year to $326, no doubt helped by MetroPCS’ lean operations, while its cash cost per user dipped $2 to $26. However, an increase in capital expenditures from $539 million last year to more than $1 billion this year took its toll on profits.
A significant portion of that increased capex was associated with the carrier’s aggressive rollout of LTE services, which recently surpassed 157 million potential customers covered on its way to 200 million pops covered by year end. With the addition of MetroPCS’ spectrum, T-Mobile US said it was on track to deliver up to 40 megahertz of spectrum dedicated to LTE services in the 1.7/2.1 GHz band across 90% of the nation’s top 25 markets beginning in 2014.
As for its often-forgotten HSPA-based 3G network that is being moved from its 1.7/2.1 GHz spectrum band to the 1.9 GHz band to make way for LTE, T-Mobile US noted that 228 million pops were still covered by that network on the 1.7/2.1 GHz band, while 180 million pops are covered with 1.9 GHz spectrum.
Looking ahead, T-Mobile US said it expects direct postpaid net customer additions to come in at around 1 million to 1.2 million customers for all of 2013, suggesting it expects second-half growth to fall just short of what the carrier managed to post during the second quarter. T-Mobile US could also be seeing a new suitor at its door, as Dish Network Chairman Charlie Ergen has continued making suggestions that the satellite television provider that happens to have billions of dollars burning a hole in its pockets as well as 30 megahertz of spectrum that it must put into use is interested in some sort of partnership with the carrier.
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