MetroPCS posts larger profit, weaker subscriber growth

MetroPCS reported weaker subscriber growth in the third quarter amid intensifying competition in the flat-rate prepaid market, and though it also posted higher profit, the company cut its outlook for 2009. The carrier had net income of $73.55 million, up 64 percent from $44.88 million in the year-ago quarter, mainly on cost cuts. The company's quarterly profit and revenue topped market expectations, but subscriber additions were weaker than expected. Of late, MetroPCS has come under even more competition from the likes of Sprint Nextel's Boost Mobile unit, Leap Wireless and TracFone Wireless, which recently launched its flat-rate Straight Talk plans at Wal-Mart stores nationwide.

"In a seasonally slow quarter, we reported net additions that were below our expectations, due primarily to elevated churn and a deceleration in gross additions," MetroPCS CEO Roger Linquist said in a statement. "We believe this was the result of continued U.S. macro-economic weakness, an increasingly competitive environment, and upward adjustments we made to the price of certain handsets."

Here's a breakdown of MetroPCS' key quarterly metrics:

Revenue: Total revenues were $896 million, up 30 percent from $687 million in the year-ago quarter. Service revenues jumped 33 percent to $812 million, up from $611 million in the third quarter last year.

Subscribers: The company had net subscriber additions of around 66,000 in the quarter, down significantly from the 249,000 it had in the year-ago quarter and the 206,000 it had in the second quarter. The company ended the quarter with 6.32 million total subscribers.

Churn: Churn rose to 5.8 percent, up from 4.8 percent in the third quarter last year and flat from the second quarter.

ARPU: ARPU was $41.08 in the quarter, up from $40.73 in the year-ago quarter $40.52 in the second quarter. The company said the increase was primarily due to a favorable rate plan sales mix and its unlimited international calling plan, which it launched in June.

The company's performance on subscriber additions drew disappointment from analysts. "It's hard to argue that competition increased significantly to Q3 from Q2 to justify these weak results as today T-Mobile USA reported a decline in its postpaid customer base and a dramatic slowdown in its prepaid subscriber growth, and we estimate that Straight Talk added only 50,000 customers across all its markets in Q3," Pali Research analyst Walter Piecyk wrote in a research note. "Sprint and its prepaid offering by Boost Unlimited seemed to be the only low-end wireless provider that reported any traction. We expect Straight Talk and other new competitors to have a larger impact on results in Q4."

MetroPCS' stock was down more than 7 percent on the news to around $6.12 per share.

For more:
- see FierceWireless' Q3 earnings page [1]
- see this release [2]
- see this Dow Jones Newswires article [3] (sub. req.)
[4]

Related Articles:
MetroPCS selects Ericsson, Samsung as LTE vendors [5]
MetroPCS, Leap stung by aggressive tactics of competitors [6]
MetroPCS' profit drops 48% as churn rises [7]
Wal-Mart offering unlimited voice, web and text for $45 a month [8]