Regional wireless operator MetroPCS Communications Inc. (PCS) saw its stock price punished this morning after the carrier released lower than expected second quarter results that showed higher earnings, but slower growth that was impacted by increased customer churn.
MetroPCS reported that revenues increased 19% year-over-year during the quarter to $1.2 billion, buoyed by an increase in average revenue per user from $39.84 in 2010 to $40.49 this year and a 19% year-over-year increase in its customer base to 9.079 million subscribers.
Quarterly customer growth dipped 34% year-over-year from 303,009 net subscriber additions during the second quarter of 2010 to 198,810 net customer additions this year. That growth was impacted by an increase in customer churn from 3.3% last year to 3.9% this year. MetroPCS attributed the increased churn to false churn adjustments made during the first quarter as well as economic pressures on its customer base.
Despite the uptick in revenues, costs also increased causing overall income to remain relatively flat year-over-year at $74.7 million for the quarter, or a return of 23 cents per share. Additional expenses included an 8.3% increase in cost per gross addition to $177.88 and a 5.8% increase in its monthly cost per user to $18.94.
The results sent MetroPCS’ stock price down more than 30% in early Tuesday trading to as low as $10.44 per share.
MetroPCS also said it will increase capital expenditures this year from its previous guidance of as much as $900 million to its new plan to spend as much as $1 billion. Most of that additional expenditure is expected to help bolster its CDMA network as well as provide additional microwave backhaul capabilities for its LTE operations.
Analysts at Wells Fargo Securities L.L.C. noted that MetroPCS’ increased churn numbers could also show itself in Leap Wireless International Inc.’s second quarter results, which are set to be released tomorrow. The news could also spill into AT&T Inc.’s ongoing attempts to acquire T-Mobile USA Inc. as perceived strength at both MetroPCS and Leap was pointed out by AT&T in its argument that the mobile industry would remain competitive with the removal of T-Mobile USA.
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