MVNO Ting works through Sprint-related issues in Q2, now sees 'solid' GSM-based business

Tucows CEO Elliott Noss said that his company's Ting Mobile MVNO has worked through most of the problems it had in terms of customer service as a result of changes Sprint (NYSE: S) made to its rules for devices that customers want to take to MVNOs. Meanwhile, Noss said that since Ting started supporting GSM service in March, likely via T-Mobile US' (NYSE:TMUS) network, a "solid" chunk of carrier's business is now GSM-based.

Although Ting has worked through the customer service issues, because it had to shutter marketing for a period during the second quarter its subscriber growth slipped a bit from the year-ago quarter. Ting added 10,000 accounts and 15,000 devices during the quarter, compared to 12,000 accounts and 18,000 devices in the second quarter of 2014 (and compared to more than 9,000 accounts and almost 16,000 devices in the first quarter).

At the end of the second quarter Ting Mobile had a total of more than 113,000 accounts and 178,000 devices.

On the company's earnings conference call, Noss noted that in the first quarter Ting's customer support team "was struggling to keep up with call volume and we shut down all marketing and promotional activities" until it could get back to "the level of service that has defined and propelled the Ting brand."

Those conditions persisted in April and May, but Noss said the problems were largely fixed by June. 

In February Sprint instituted a "Financial Eligibility Date (FED)" validation on its devices, which was part of the carrier's commitment to unlock its devices. Sprint is using the FED system to make sure that customers who activate their Sprint device on another carrier or service provider, such as an MVNO, have paid for their device. Under the system, customers who still owe money on their devices can't activate them elsewhere, which affected Ting.

Noss said that Ting now has "clear, consistent requirements and processes" for how Sprint devices can come onto Ting's service, and while it is more complicated than it had been, "at least it is settled."

Noss said customer service call hold times are still too long and "the customer service experience is not what we want it to be and we think that impacts conversation and referrals. So we think that's still a drag."

However: "We have a much better handle on the drivers of customer support interactions with the redesign of the business processes and we have a staffing plan to keep us out in front it," Noss added. "Perhaps most importantly we now have a greater abundance of prospects to convert." Noss said Ting's website traffic and customer support interactions reached all-time highs in the second quarter.

Meanwhile, Noss said the key metrics of the Ting Mobile business remained consistent from the year-ago period. Churn was around 2.5 percent each month, average revenue per user was around $35 per month, gross margins were around 50 percent and cost per acquisition continued to hover at under a $100.

In terms of the GSM business, Noss said that he is not sure if there is pent-up demand that Ting is working through, but "we certainly are signing up a lot of people on the GSM side." Noss said Ting is not breaking out how many customers it is signing up for Sprint-based service compared to GSM-based service, but said "GSM is now just a solid part of the business."

Interestingly, Noss said that Ting Mobile is not yet seeing "from either of our partners' willingness to let us do some of the things that Google is doing for instance. But we will keep pushing." Both Sprint and T-Mobile are partners with Google (NASDAQ: GOOG) on the search giant's Project Fi MVNO, which switches between Wi-Fi, T-Mobile and Sprint service to get the best signal and also credits customers for unused mobile data.

Looking ahead to the second half of the year, Noss said Tucows has "a great opportunity with Ting Mobile to get additional returns on incremental operational improvement. We have a choice of two nationwide networks and we can now accept a far greater ... percentage of owned devices."

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