T-MOBILE USA REPORTS FOURTH QUARTER AND FULL YEAR 2008 RESULTS
$1.57 billion Operating Income Before Depreciation and Amortization ("OIBDA") in the fourth quarter of 2008, up 18% from the fourth quarter of 2007
§ 31% increase in data services revenue compared to the fourth quarter of 2007
§ Total messages carried in the quarter more than doubled compared to the fourth quarter of 2007
§ $4.9 billion service revenue in the fourth quarter of 2008, up 12% from the fourth quarter of 2007
§ 621,000 net new customers added in the fourth quarter of 2008
§ At the end of 2008 the 3G network covers 130 cities
§ T-Mobile USA reclaims J.D. Power and Associates Award for Wireless Customer Care Performance
BELLEVUE, Wash., February 27th, 2009 -- T-Mobile USA, Inc. (T-Mobile USA) today reported fourth quarter 2008 results. In the fourth quarter of 2008, T-Mobile USA reported OIBDA of $1.57 billion, up 18% compared to the fourth quarter of 2007, data services revenues up 31% compared to the fourth quarter of 2007, and service revenues of $4.9 billion, up 12% compared to the fourth quarter of 2007.
"In Q4, we began to realize in earnest the benefits of our aggressive 3G buildout, positioning ourselves to deliver new data services," said Robert Dotson, president and CEO, T-Mobile USA. "We saw many customers quickly jump on the T-Mobile 3G bandwagon. In the very first quarter of our offering widespread 3G service, almost 40% of handset sales to contract customers were converged devices, and half of these were 3G enabled devices such as the T-Mobile G1 with Google and the Samsung Behold. By offering compelling products and high-speed data service along with the best value for money in the industry, we can really come through for customers at a time when they need it most."
René Obermann, Chief Executive Officer, Deutsche Telekom, said, "As the U.S. business continues to ramp up its rollout of nationwide 3G services, we are excited by the growth opportunities opening up for us in mobile communications data services. Today, we are just scratching the surface when it comes to seizing the opportunities available to us in the U.S. market for data and related communications services."
Customers
· In the fourth quarter of 2008, T-Mobile USA added 621,000 net new customers, down from 670,000 in the third quarter of 2008, and down from 951,000 in the fourth quarter of 2007.
o The number of net new customer additions was down slightly compared to the third quarter of 2008 despite higher gross customer additions. This is primarily due to higher blended churn, as explained below. Gross customer additions were higher both sequentially and compared to the fourth quarter of 2007.
o Contract customer net additions made up almost 43% of customer growth, compared to 44% in the third quarter of 2008 and 77% in the fourth quarter of 2007.
o Prepaid net additions were 355,000 in the fourth quarter of 2008, down from 377,000 in the third quarter of 2008 and up from 218,000 in the fourth quarter of 2007. The sequential decrease in prepaid net customer additions was primarily due to seasonally higher prepaid churn.
· Contract customers comprised 82% of T-Mobile USA's total customer base at December 31, 2008. T-Mobile USA ended 2008 with 32.8 million customers.
Churn
· Contract churn was 2.4% in the fourth quarter of 2008, in line with the third quarter of 2008 and up from 1.8% in the fourth quarter of 2007.
o Contract churn continued to be impacted in the fourth quarter of 2008 by customers coming to the anniversary of their two-year contracts (that were first introduced in April 2006) and competitive intensity.
· Blended churn, including both contract and prepaid customers, was 3.3% in the fourth quarter of 2008, up from 3.0% in the third quarter of 2008 and 2.8% in the fourth quarter of 2007. Blended churn was also impacted by seasonally higher prepaid churn in the fourth quarter of 2008 compared to the third quarter of 2008.
OIBDA and Net Income
· T-Mobile USA reported OIBDA of $1.57 billion in the fourth quarter of 2008, up from $1.53 billion in the third quarter of 2008 and up from $1.33 billion in the fourth quarter of 2007.
· OIBDA margin was 31% in the fourth quarter of 2008, in line with the third quarter of 2008 and up from 30% in the fourth quarter of 2007.
o The improvement in OIBDA margin compared to the fourth quarter of 2007 is primarily due to lower CPGA.
· Net income for the fourth quarter of 2008 was $483 million, up from the $442 million in the third quarter of 2008 and $383 million in the fourth quarter of 2007.
Revenue
· Service revenues (as defined in Note 1 to the Selected Data, below) were $4.90 billion in the fourth quarter of 2008, in line with the third quarter of 2008, and up from $4.37 billion in the fourth quarter of 2007.
o The increase in service revenues year over year was primarily due to the growth in contract customers and the SunCom Wireless acquisition.
· Total revenues, including service, equipment, and other revenues were $5.72 billion in the fourth quarter of 2008, up from $5.51 billion in the third quarter of 2008 and $5.07 billion in the fourth quarter of 2007.
o The sequential growth in total revenues in the fourth quarter of 2008 compared to the third quarter was due to higher equipment revenues driven by new devices such as the T-Mobile G1 with Google.
o The acquisition of SunCom contributed $189 million to T-Mobile USA's total revenues in the fourth quarter.
ARPU
· Blended Average Revenue Per User ("ARPU" as defined in note 1 to the Selected Data, below) was $50 in the fourth quarter of 2008, compared to $52 in the third quarter of 2008 and the fourth quarter of 2007. Rounding movements account for approximately $1 of the sequential fall in blended ARPU, and the remaining difference is explained below.
· Contract ARPU was $54 in the fourth quarter of 2008, down from $55 in the third quarter of 2008 and $56 in the fourth quarter of 2007.
o The decrease in contract ARPU sequentially and year over year was primarily due to lower usage based revenues from contract customers.
· Prepaid ARPU was $23 in the fourth quarter of 2008, down from $24 in the third quarter of 2008 and higher than $20 in the fourth quarter of 2007.
o The decrease quarter over quarter was primarily driven by new customer additions being added late in the fourth quarter.
o The increase in prepaid ARPU year over year is due to higher ARPU products such as FlexPaySM no-contract.
· Data services revenue (as defined in Notes 1 and 9 to the Selected Data, below) was $905 million in the fourth quarter of 2008, representing 18.5% of blended ARPU, or $9.30 per customer, up from 17.3% of blended ARPU, or $8.90 per customer in the third quarter of 2008, and 15.8% of blended ARPU, or $8.20 per customer in the fourth quarter of 2007. Data services revenue increased 31% in the fourth quarter of 2008 versus the fourth quarter of 2007, up from an increase of 28% in the third quarter of 2008 versus the third quarter of 2007.
o Growth in messaging revenue continued to be the most significant driver of data ARPU, as customers continue to purchase plans that include messaging, including unlimited voice and data plans. The total number of messages carried on the T-Mobile USA network increased to 57 billion in the fourth quarter of 2008, compared to 49 billion in the third quarter of 2008 and 24 billion in the fourth quarter of 2007.
o Continued growth in converged device users was another significant driver for increased data revenues. This includes 3G-enabled devices such as the T-Mobile G1 and the Samsung BeholdTM.
o T-Mobile USA launched web2goSM in the fourth quarter of 2008, creating an improved Web browsing experience on select devices.
CPGA and CCPU
· The average cost of acquiring a customer, Cost Per Gross Add ("CPGA" as defined in note 4 to the Selected Data, below) was $270 in the fourth quarter of 2008, down from $290 in the third quarter of 2008 and $300 in the fourth quarter of 2007.
o The decrease in CPGA compared to the third quarter of 2008 is primarily due to lower commissions and advertising expense along with lower equipment subsidy loss.
· The average cash cost of serving customers, Cash Cost Per User ("CCPU" as defined in note 3 to the Selected Data, below), was $25 per customer per month in the fourth quarter of 2008, consistent with the third quarter of 2008 and fourth quarter of 2007.
Capital Expenditures
· Cash capital expenditures (see note 7 to the Selected Data below) were $895 million in the fourth quarter of 2008, compared with $956 million in the third quarter of 2008 and $1.01 billion in the fourth quarter of 2007. For 2008 as a whole, cash capital expenditures amounted to $3.6 billion compared to $2.7 billion in 2007.
o Cash capital expenditures decreased sequentially due to an increase in incurred capital expenditures being more than offset by payment timing differences.
o The increase in capital expenditures year over year was primarily due to the construction of the 3G network.
· T-Mobile USA continued to improve network coverage in the fourth quarter of 2008, adding approximately 1,100 new GSM/GPRS/EDGE cell sites, bringing the total number of cell sites at the end of the quarter to 44,000.
· T-Mobile USA continues to invest in the UMTS / HSDPA (3G) network, which now reaches 107 million people in 130 cities.
Stick Together Highlights
· On February 4, 2009, T-Mobile USA was ranked highest in wireless customer care performance by J.D. Power and Associates. Winning this award in 7 of the last 8 reporting periods continues to demonstrate T-Mobile USA's strong and successful focus on customer service.
· On January 22, 2009, Fortune magazine announced that T-Mobile USA was the first-ever telecommunications company to be ranked in its "100 Best Companies to Work For" list. "Service is our number one priority at T-Mobile. And the best way to deliver outstanding service is to create an environment where our employees can make a meaningful difference for customers everyday," said Dotson. "As the first telecommunications service provider to be included in Fortune's ‘Best Companies to Work For', we're gratified and honored to be named among these elite companies."
· On Nov. 20, 2008, T-Mobile USA, introduced web2goSM, which makes it easier to view and navigate the Web from basic voice phones and smartphones alike, providing customers with better Web browsing, improved search with Yahoo! oneSearchTM, a customizable home page and a simplified shopping and download experience.
T-Mobile USA is the U.S. operation of Deutsche Telekom AG's (NYSE: DT) Mobile Communications Business, and is a wholly-owned subsidiary of T-Mobile International. In order to provide comparability with the results of other US wireless carriers, all financial amounts are in US dollars and are based on accounting principles generally accepted in the United States ("GAAP"). T-Mobile USA results are included in the consolidated results of Deutsche Telekom, but differ from the information contained herein as Deutsche Telekom reports financial results in Euros and in accordance with International Financial Reporting Standards (IFRS).
This press release includes non-GAAP financial measures. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. Reconciliations from the non-GAAP financial measures to the most directly comparable GAAP financial measures are provided below following Selected Data and the financial statements.
