T-Mobile US continued to punch above its weight during the third quarter, with the nation’s No. 4 carrier posting overall customer growth on par – or better – than its larger rivals.
T-Mobile US announced that it added just over one million new connections to its network during the third quarter, just topping the 989,000 net connection additions posted by AT&T Mobility and just shy of the nearly 1.1 million net connection additions posted by Verizon Wireless. Where does Sprint fit into this comparison? The less said, the better.
T-Mobile US’ growth was supported across the board, with significant contributions from its branded postpaid and wholesale operations. In addition to comparing well against its peers, T-Mobile US’ third-quarter growth was up by a factor of nine compared with the 160,000 net connection additions posted during the same quarter last year and fell just short of the 1.13 million net connection additions from the second quarter of this year.
T-Mobile US reported that total smartphone sales increased from 2.3 million units during the third quarter of 2012 to 5.6 million units this year. That increase was likely bolstered by the inclusion of Apple’s iPhone product lineup earlier this year, though the impact of the device on third-quarter sales were somewhat muted by a limited supply of the latest iPhone models that launched late in Q3. T-Mobile US noted that iPhone sales accounted for just 15% of total smartphone sales during the latest quarter.
Bolstering growth was a substantial drop in both branded postpaid (2.3% in 2012 to 1.7% this year) and prepaid (6.2% in 2012 to 5% this year) customer churn on a separate basis, though combined churn remained steady at 3.1%.
While its customer base swelled, average revenue per user dipped highlighting the new reality of T-Mobile US’ altered rate plans tied to its “Un-carrier” strategy. Blended direct ARPU dropped more than $5 year-over-year to $45.38, while also dipping $1.29 sequentially. T-Mobile US has acknowledged that its Simple Choice plans would impact consumer spending each month. T-Mobile US management reported that 61% of its customer base were on Simple Choice plans at the end of the third quarter.
The drop in monthly spending was not enough to offset the explosive customer growth, with T-Mobile US’ total revenues surging from $4.9 billion during the third quarter of 2012 to $6.7 billion this year. The growth was not as dramatic when combining the T-Mobile USA and MetroPCS results from the third quarter of last year, which totaled $6.15 billion.
An increase in operational expenses also impacted the bottom line as net losses increased sequentially from a loss of $16 million during the second quarter of this year to a loss of $36 million during the third quarter. The latest results were significantly better than the loss of $7.7 billion T-Mobile US reported during the third quarter of last year, though those results were impacted by an $8.1 billion impairment charge related to its since closed acquisition of MetroPCS.
T-Mobile US also reported it spent more than $1 billion on capital expenditures during the latest quarter, which was flat sequentially, and up just slightly from the nearly $1 billion spent collectively between the T-Mobile USA and MetroPCS operations during the third quarter of 2012. T-Mobile US noted that it had recently surpassed 200 million potential customers covered by its LTE network, which puts it ahead of schedule on that deployment.
The carrier did manage to cut its cost per gross customer addition from $382 to $307 year-over-year, while its cash cost per user dipped from $28 in 2012 to $25 this year.
T-Mobile US’ stock (TMUS) was trading up slightly early Tuesday at $28.55 per share.
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