HAMPTON, N.H. (November 6, 2008) -
Though T-Mobile USA reported double-digit year-to-year revenue growth in 3Q08, the company faces tough competition and a weak economy in upcoming quarters, threatening the company's relatively consistent record of steady growth over the past three years.
- TBR believes the significant increase in T-Mobile USA's postpaid churn in 3Q08 is due in part to competitive pressure from the 3G iPhone, which was launched on AT&T's network in July. AT&T indicated it saw 1 million customers switch to AT&T due to the iPhone, and it appears many of those customers may have come from T-Mobile. Though T-Mobile launched the G1 device on its network in September, the company did not previously have a handset that was competitive with the iPhone. T-Mobile's 3Q08 postpaid churn jumped 50 basis points year-to-year to 2.4%, the highest level since 3Q05.
- T-Mobile USA reported a huge shift in postpaid-prepaid mix in 3Q08, with over half of net growth coming from prepaid customers. The company's 293,000 postpaid net additions were the lowest since the company was formed in 2001. Some high-value postpaid subscribers were likely drawn to AT&T by the iPhone, while the downturn in the economy may have prompted more subscribers than usual to sign up for prepaid plans to save money.
- T-Mobile USA still trails competitors in data monetization as the company continues to launch 3G in additional markets. Though the company's improvement in data monetization was not impressive in 3Q08, the addition of higher-end devices, such as the G1, will likely inflate data ARPU in upcoming quarters. Just 17% of the company's revenue originated from data, as opposed to 25% and 24% for Verizon and AT&T, respectively. T-Mobile maintained leadership in monetizing messaging, with an average of 508 messages per subscriber per month, compared to 384 messages per subscriber at Verizon.
- Unlike AT&T, which saw sharp declines in margins due to subsidies associated with the 3G iPhone, T-Mobile managed relatively flat margin performance year-to-year. However, as the company rolls out its 3G network, it will need to up its investment in getting higher-end phones such as the G1 and smartphones on the network. As a result, the company is likely to feel margin pressure coming from increased subsidies in 4Q08 and 2009.
For additional comments or follow-up, please feel free to contact:
__________________________________________________________________________
Kate Price
Analyst, NBQ
Technology Business Research, Inc.
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Hampton, NH 03842
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Kate Price
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Technology Business Research
11 Merrill Drive
Hampton, NH 03842
603.758.1837