TracFone's Q1: 839K net adds, rising revenues and increasing ARPU

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América Móvil's U.S. TracFone unit reported stronger subscriber growth and gains in average revenue per user in the first quarter. Though the parent company did not mention it, TracFone's Straight Talk launched support for Apple's (NASDAQ:AAPL) iPhone in January, which likely helped boost its first quarter numbers.

TracFone added 839,000 subscribers in the first quarter, América Móvil said, higher than the 369,000 net subscriber additions in the first quarter of 2012 and even higher than the 753,000 customers it added in the fourth quarter, which is traditionally the strongest for carriers. TracFone, by far the largest U.S. MVNO, uses Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S) and T-Mobile USA's networks. The company ended the first quarter with 23.2 million customers, 15.4 percent higher than it had a year ago. 

TracFone also saw its revenue shoot up 39.8 percent to $1.51 billion in the first quarter. The company's revenue included service revenue of $1.28 billion and equipment revenue of $230 million, which were 32.3 percent and 104.5 percent higher than in the year-ago period, respectively.

In January TracFone's prepaid Straight Talk brand starting selling Apple's iPhone, including the LTE-capable iPhone 5, coupled with unlimited talking, texting and data starting at $45 per month--significantly cheaper than what other carriers charge. Although neither company has confirmed the relationship, Verizon likely provides service to Straight Talk's iPhones. Straight Talk also supports existing GSM iPhones that users port to the service. The 16 GB iPhone 5 for Straight Talk sells for the full price of $650, while the 16 GB iPhone 4S goes for $550 and the 8 GB iPhone 5 goes for $450. 

TracFone has said it does not limit Straight Talk subscribers' data usage at a specific threshold; instead, it evaluates customers' data intake on a case-by-case basis and will throttle the speeds of those users who the company deems to be consuming too much data.

Perhaps as a result of more customers signing up for rate plans that included data, TracFone's ARPU increased to $19 in the quarter from $16 in the year-ago period. The company said churn fell to 3.7 percent from 3.9 percent in the first quarter of 2012.

TracFone also operates the Net10 and SafeLink Wireless brands. SafeLink is a band that uses the federal government's Lifeline program. Last year the FCC instituted new rules that required carriers that received Lifeline funds certify that their Lifeline subscribers were eligible for the program, an effort to streamline the program and reduce waste. As a result, according to a report earlier this year in the Wall Street Journal, 41 percent of the roughly 6 million subscribers in the Lifeline program "either couldn't demonstrate their eligibility or didn't respond to requests for certification."

For more:
- see this release (PDF)
- see this Bloomberg article
- see this Dow Jones Newswires article
- see this Reuters article

Special Report:  Wireless in the first quarter of 2013

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