In what is traditionally a quiet period for the wireless industry, T-Mobile USA Inc. reported robust third-quarter results that trailed only Verizon Wireless in customer growth and further separated the two operators as the fastest-growing among their peers. The two companies combined to account for nearly 60 percent of the 4.38 million net customer additions posted by the nation’s six largest operators during the quarter.
T-Mobile USA’s 901,000 net customer additions during the quarter was a 35-percent improvement compared with the 670,000 subscribers the carrier added in third-quarter 2003 and in line with analysts’ estimates. Postpaid customers made up 90 percent of its growth during the quarter and comprised 89 percent of its nearly 16.3 million total customers at the end of the third quarter.
T-Mobile USA’s customer growth trailed only Verizon, which posted more than 1.6 million new customers in the quarter. Analysts have noted that in the wake of wireless local number portability beginning last November, customers would flock to either the carrier seen as the quality leader-Verizon-or the operator seen as the value leader-T-Mobile USA.
“This is not much of a surprise as both carriers have been posting strong results over the past several quarters,” said Albert Lin, telecom analyst at American Technology Research.
With T-Mobile USA’s strong customer growth, the nation’s big six surpassed the 3.88 million customers added during the third quarter of 2003 as well as the first two quarters of this year. Indeed, industry is on track to post more than 16 million new customer additions for the year.
T-Mobile USA’s customer growth was spurred by a decrease in churn from 3.3 percent during the third quarter of 2003 to 3 percent this year, though the carrier noted churn increased from 2.8 percent during the second quarter of this year due to an increase in the volume of postpaid subscribers reaching the end of their one-year contracts. T-Mobile USA’s churn levels also remain among the highest in the industry and a cause of concern for analysts.
The cost per gross customer addition dropped from $334 during the third quarter of 2003 to $301 this year, which T-Mobile USA attributed to lower dealer compensation, while the average cash cost of serving customers remained stable at $24.
Average revenue per user increased slightly from $54 during the third quarter of 2003 to $55 this year, which the carrier attributed to universal service regulatory cost recovery fees. Despite being known as the value leader, T-Mobile USA’s ARPU was significantly higher than that posted by Verizon Wireless and Cingular Wireless L.L.C.
The impact of data services also increased at T-Mobile USA, from 2.7 percent of ARPU during the third quarter of 2003 to 5.6 percent this year. ATR’s Lin noted the growing impact of data revenues has shown up across the board for carriers. Even Nextel Communications Inc., which to this point has posted the smallest impact from non-voice services, posted a 50-percent year-over-year increase in data revenues.
T-Mobile USA’s total revenues increased 37 percent year-over-year, from $2.2 billion during the third quarter of 2003 to $3 billion this year. Net income also increased from a loss of $39 million last year to a return of $254 million this year.
Meanwhile, Western Wireless Corp. posted robust, through tardy third-quarter results.
The rural carrier reported $276.1 million in domestic revenue in the third quarter, a 6-percent improvement compared with the $260.6 million the carrier posted during the third quarter of 2003. Roaming revenues dropped from $61.1 million in third-quarter ’03 to $53.1 million this year, which Western Wireless attributed to contractual rate reductions that offset a 16-percent increase in roaming minutes of use.
Including its international operations, Western Wireless posted a 24-percent increase in total revenues during the third quarter, from $401.3 million last year to $497.5 million this year.
Consolidated net income also increased from a loss of $18.5 million during the third quarter of 2003, a loss of 23 cents per share, to a return of $30.4 million this year, or a return of 30 cents per share.
Western Wireless also reported adjustments to previously posted financial results that forced the carrier to delay reporting its third-quarter financials, originally set for Nov. 3. Those adjustments included accounting for certain direct labor costs associated with network construction at the carrier’s international operations.
The adjustments include an increase in net income for the first half of this year, from $72.4 million to an adjusted net income of $77.6 million, as well as adjustments to full-year 2003 net income from a loss of $300,000 to a loss of $2.8 million, for the full-year 2002 from a loss of $185.7 million to $183.8 million, and for full-year 2001 from a loss of $155.1 million to a loss of $148.9 million.
Western Wireless noted it plans to file restated documents with the Securities and Exchange Commission.
The carrier also posted 28,400 domestic net customer additions during the third quarter, a 35-percent year-over-year increase compared with the third quarter of 2003. The carrier ended the quarter with more than 1.35 million domestic customers, including 6,200 prepaid subscribers who Western Wireless did not previously include in its reported customer base.
Postpaid customer churn remained stable year-over-year at 2.4 percent, while ARPU increased slightly from $50.15 during the third quarter of 2003 to $51.27 this year. Cash cost per user also improved from $25 last year to $24.65 this year, while the cost per gross addition dropped from $384 during the third quarter of 2003 to $356 this year.
