MetroPCS' Q4 subscriber losses surprise analysts
MetroPCS (NYSE:PCS) reported that it lost around 93,000 subscribers during the fourth quarter, bringing its total subscriber loses for 2012 to around 460,000. The prepaid carrier's fourth-quarter declines were far greater than analysts had expected, and the news sent MetroPCS' shares down around 2 percent to $9.50 per share.
"Today's pre-announced Q4 2012 subscriber results are well below our expectation of a gain of 63,000 and consensus expectations of 50,000 adds," said Craig Moffett, analyst at Bernstein Research, according to Investor's Business Daily. "The results from MetroPCS suggest that prepaid [growth] may be rapidly deteriorating and competitive intensity is rising."
The results are particularly worrying for MetroPCS, which is hoping to close a merger with Deutsche Telekom's T-Mobile USA. The companies expect the transaction to close sometime this year. However, Moffett noted that MetroPCS' subscriber loses likely won't affect DT's plans since T-Mobile USA is in need of the additional spectrum that MetroPCS owns in the U.S. market.
Nonetheless, some analysts said MetroPCS' fourth-quarter results highlight the carrier's precarious position in the hotly competitive U.S. wireless market.
"This is the first time [Metro] PCS has lost subscribers on a net basis in Q4, which is typically its second strongest quarter behind Q1, and marks the company's third consecutive quarter of net subscriber losses," noted UBS analyst John Hodulik, according to Investor's Business Daily. "We believe this underscores the urgency with which the company pursued merger partners before reaching a deal with T-Mobile in October."
In the fourth quarter, MetroPCS reported gross additions of 866,000 subscribers, a 29 percent decrease over the fourth quarter of 2011. The company ended the fourth quarter of 2012 with around 8.9 million subscribers, notably down from the 9.3 million customers MetroPCS ended with in 2011.
However, the carrier did show some bright spots. MetroPCS reported 2.2 million 4G LTE subscribers at the end of the fourth quarter, which it said was an increase of 117 percent from the third quarter of 2012. And MetroPCS' churn shrank to 3.6 percent in the period, down slightly from the 3.7 percent it reported in the fourth quarter of 2011 and the third quarter of 2012.
MetroPCS' fourth-quarter results are preliminary; the carrier is scheduled to post full fourth-quarter results Feb. 18.
Under MetroPCS' proposed deal with T-Mobile, which still requires regulatory approval, Deutsche Telekom will hold 74 percent of the merged business and will pay MetroPCS shareholders $1.5 billion in cash. The transaction will combine T-Mobile's spectrum with MetroPCS' spectrum, and it will allow T-Mobile to offer a broader and deeper LTE network. A combined T-Mobile and MetroPCS will still sit behind Sprint Nextel (NYSE:S) as the nation's No. 4 carrier by subscribers.
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