T-Mobile USA swung back to losing customers in the second quarter, with postpaid subscriber losses overshadowing gains the company made in the prepaid market. The carrier also said it continues to make progress on its planned LTE buildout, with service still set to launch next year.
However, as in recent quarters, T-Mobile's earnings mainly focused on its subscriber and churn metrics. Overall, T-Mobile lost a net 205,000 subscribers in the quarter, a much weaker result than the 187,000 net customer additions it recorded in the first quarter and the 50,000 net customer losses it reported in the year-ago period. Customer losses at its U.S. unit have been a key concern for parent company Deutsche Telekom.
"We are observing a slowdown in customer growth across the U.S. market overall," Deutsche Telekom CEO Rene Obermann told reporters, according to Reuters. "Still, to compensate for that, we need to continue improving the churn rate and step up our efforts to increase gross customer adds."
"There is no end in sight as T-Mobile will continue to lose subscribers in 2H12 due to the upcoming iPhone launch that the operator will miss out on," said Eric Costa, a research analyst in Technology Business Research's Networking and Mobility Practice. "T-Mobile will await the completion of its network upgrades in 2014 to assist in a revival of the company's revenue growth."
T-Mobile is spending around $4 billion to upgrade its network to LTE and offer HSPA services on its 1900 MHz spectrum. Costa said the upgrade would help T-Mobile to stop bleeding postpaid customers next year by giving them the network speeds they're looking for elsewhere. "T-Mobile's network modernization will allow the operator to remain competitive with all other Tier 1 operators in 2013," Costa predicted.
Part of T-Mobile's network strategy revolves around its proposed AWS spectrum swap with Verizon Wireless (NYSE:VZ), which is contingent upon Verizon getting approval for its own $3.9 billion AWS spectrum acquisition from a group of cable companies. The deal would improve T-Mobile's network coverage in 15 of the top 25 markets in the U.S. markets and allow it to expand coverage to 60 million more people. T-Mobile plans on using its 1700 MHz AWS spectrum for LTE while it refarms its 1900 MHz PCS spectrum for HSPA+ service.
Here is a breakdown of T-Mobile's key quarterly metrics:
Subscribers: T-Mobile reported net postpaid customer losses of 557,000 in the quarter, compared with 536,000 postpaid losses in the year-ago period and 510,000 postpaid losses in the first quarter. Offsetting that, the carrier posted 227,000 prepaid customer additions in the second quarter, which was a stronger result than the 71,000 prepaid net customer losses in the year-ago period, but weaker than the prepaid net customer additions of 249,000 in the first quarter.
ARPU: The carrier's postpaid average revenue per user increased slightly year-over-year to $57.35. Prepaid ARPU increased 13.6 percent year-over-year to $26.81.
Churn: T-Mobile's branded postpaid churn was 2.10 percent in the second quarter, lower than the 2.5 percent it had in the first quarter and 2.6 percent in the year-ago period.
Financials: The carrier's total revenue clocked in at $4.7 billion, up from $4.32 billion in the year-ago period. The carrier reported total service revenues of $4.4 billion, flat from the first quarter and down 5.2 percent from $4.6 billion in the second quarter of 2011. Adjusted OIBDA increased 4.8 percent year-over-year to $1.3 billion in the second quarter of 2012. Handset subsidy costs dropped 38 percent to $310 million in the quarter.
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