Flat-rate carrier MetroPCS (NASDAQ:PCS) reported strong quarterly earnings and record quarterly net subscriber additions in the first quarter, and the company is banking on the strength it has seen in smartphones to continue this year.
The company, which now has LTE service in all of its 14 core markets, also said it expects to introduce more LTE handsets later this year, and begin testing Voice over LTE technology by year-end. MetroPCS did not comment on a potential partnership with wholesale LTE provider LightSquared; MetroPCS' fellow flat-rate rival Leap Wireless (NASDAQ:LEAP) recently inked a deal with LightSquared.
MetroPCS CEO Roger Linquist said the company will focus on boosting the number of subscribers with smartphones running Google's (NASDAQ:GOOG) Android platform as part of an "Android for all" push, before moving onto an "LTE for all" strategy next year.
Smartphones: MetroPCS currently counts three Android smartphones in its lineup, and plans to add more throughout the year, though MetroPCS executives did not give details. In the first quarter, 16 percent of MetroPCS' customers upgraded their handset, compared with 14 percent in the year-ago period. MetroPCS COO Tom Keys said around 40 percent of all upgrades in the quarter were to Android devices, and that around 20 percent of the company's total subscriber base has a smartphone, which he said leaves plenty of room for growth.
Linquist said economies of scale will help bring down LTE handset prices. He said that in the latter part of 2012 he expects MetroPCS to be able to offer LTE handsets for less than $200. Part of this, he said, will be driven by transitioning to other LTE chipset providers beyond Qualcomm (NASDAQ:QCOM). "Along the way we are going to do all we can to incent customers to adopt LTE as their system choice," he said.
LTE and spectrum: Linquist said he hoped that AT&T's (NYSE:T) proposed $39 billion acquisition of T-Mobile USA will lead to AT&T having to divest spectrum, which MetroPCS might be interested in scooping up. He said MetroPCS will continue to make its network more efficient via cell-splitting and other optimization tricks, but warned that the company likely will need to find new sources of spectrum within two to three years.
"VoLTE gives us the opportunity to refarm our CDMA spectrum," he said. "It's really the cost of the handset though that is going to fundamentally drive our ability to make that transition earlier rather than later." MetroPCS expects capital expenditures to be between $700 million and $900 million this year, and expects its LTE network buildout to be finished by year-end.
Here is a breakdown of the company's key quarterly metrics:
Subscribers: MetroPCS added nearly 726,000 net subscribers in the first quarter, its best quarterly net additions ever, higher than its 691,000 net additions in the year-ago period. At the end of the quarter, MetroPCS counted 8.88 million total subscribers, up from 7.33 million at the end of the first quarter last year.
Financials: The company reported net profit of $56.4 million in the quarter, up from $22.7 million in the year-ago period. The company's total revenue clocked in $1.19 billion, up 23 percent from $971 million in the year-ago period. Service revenues came in at $1.05 billion, up from $853 million in the first quarter of 2010.
Churn: MetroPCS' churn was 3.1 percent, down from 3.7 percent in the year-ago quarter.
ARPU: MetroPCS' average revenue per user ticked up to $40.42, up from $39.83 in the year-ago period.
Special Report: FierceWireless Q1 earnings page
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