Prepaid, MVNOs help turn T-Mobile USA's customer results

Following a couple of quarters of customer losses, T-Mobile USA Inc. (DTEGY) managed to post a gain in subscribers during the third quarter, though that gain came at a fiscal cost.
The nation’s fourth largest operator said it added 137,000 subscribers during the third quarter, following the loss of 170,000 subscribers during the first half of the year and the loss of 77,000 customers during the third quarter of 2009. Contract customer losses dropped from 140,000 subscribers during the third quarter of 2009 to the loss of 60,000 contract customers this year, which T-Mobile USA said was due to stronger gross customer additions and sales of “connected devices,” which totaled 1.8 million at the end of the third quarter.
Counteracting the loss of postpaid customers, T-Mobile USA noted that it added 197,000 prepaid and mobile virtual network operator customers to its network during the third quarter compared with 63,000 net additions during the third quarter of 2009. The carrier attributed the growth to new MVNO partners. Towards the end of the quarter Wal-Mart Stores Inc. began offering its branded Family Mobile plans that run on T-Mobile USA’s network. T-Mobile USA said it served 2.4 million MVNO customers on its network at the end of the quarter.
In total, T-Mobile USA said it had 33.8 million subscribers on its network at the end of the third quarter.
T-Mobile USA noted that customer churn remained consistent year-over-year at 3.4%, with contract churn remaining flat at 2.4% and prepaid churn dropping from 7.4% during the third quarter of 2009 to 7.2% this year.
Average revenue per user also remained flat year-over-year at $47, with contract ARPU holding steady at $52 and prepaid ARPU dipping slightly from $20 in 2009 to $19 this year. Data ARPU was reported at $12.40 during the third quarter, or 27% of blended ARPU, an increase from the $10 reported during the third quarter of 2009. T-Mobile USA added that messaging services continued to be significant part of its blended ARPU results.
T-Mobile USA earlier this week announced tiered data pricing options for customers.
Total revenues dropped slightly year-over-year from $5.38 billion during the quarter in 2009 to $5.35 billion. However, greater customer adoption of smart phones, which typically have higher subsidies, and continued expansion of the carrier’s HSPA+ network dropped the carrier’s net income from $417 million during the third quarter of 2009 to $320 million this year. Operating income before depreciation and amortization margins also dropped from 33% to 28% year-over-year.
T-Mobile USA added that smart phone customers on its network surged 2.8 million customers at the end of the third quarter in 2009 to 7.2 million customers this year. Despite the continued network expansion, T-Mobile USA reported that capital expenditures actually dropped year-over-year from $787 million to $643 million during the quarter. The carrier yesterday announced the expansion of its HSPA+ network to new markets with plans to cover 200 million potential customers by the end of the year.