T-Mobile gets a boost from prepaid in Q1

T-Mobile USA posted a net customer increase in its first quarter along with improved finances, generally impressing analysts with better-than-expected results and offering a ray of hope for its attempts to kick start its business after AT&T's (NYSE:T) failed acquisition of the carrier.

Click here for key slides from T-Mobile's first quarter.

Specifically, T-Mobile reported net customer additions of 187,000 in the first quarter--a reversal of the 99,000 customers the carrier lost in the same quarter a year ago and the 526,000 customers it lost in the fourth quarter. T-Mobile's adjusted OIBDA rose 7.2 percent year-over-year to $1.27 billion. T-Mobile's results helped improve those of its parent company, Deutsche Telekom.

"In just a short time since the December breakup of the AT&T deal, T-Mobile USA has redefined and restarted our challenger strategy including phase one of a major brand re-launch to redefine T-Mobile in the marketplace," said T-Mobile USA CEO Philipp Humm.

Indeed, T-Mobile has been busy during the past several months. The carrier has launched a new advertising effort centered on dusting off the T-Mobile brand and promoting the speeds of its network. The company also announced plans to upgrade its network to LTE technology via a $4 billion upgrade project headed by vendors Ericsson (NASDAQ:ERIC) and Nokia Siemens Networks. T-Mobile is also considering a sale of its towers to raise cash.

Nonetheless, T-Mobile continues to face a difficult competitive landscape. The carrier is the only Tier 1 U.S. operator that does not sell Apple's (NASDAQ:AAPL) iPhone, a factor T-Mobile specifically called out in its earnings announcement: "The fourth quarter of 2011 included significantly higher contract deactivations as a result of the launch of the iPhone 4S by three nationwide competitors in mid-October." Indeed, although T-Mobile reported net positive customer acquisitions in the first quarter, that figure was largely due to T-Mobile's successes in prepaid sales, mainly from its "Monthly 4G" prepaid plans. On the postpaid, contract side of the business, T-Mobile lost 510,000.

"Branded contract churn remains a focus," acknowledged Humm, explaining that the carrier will expand its retail footprint, expand its business-to-business sales, ink new deals with MVNOs and spend up to $200 million more on advertising to move the needle.

During a conference call with media to discuss the carrier's results, T-Mobile's Humm declined to comment rumors of a possible merger between T-Mobile and MetroPCS (NYSE:PCS), which were sparked Wednesday by a Bloomberg report. Humm also said T-Mobile is not interested in purchasing the 700 MHz A and B Block spectrum licenses Verizon Wireless has said it might auction off. Humm said the licenses suffered from some interference issues and were not in valuable locations.

Here's a look at T-Mobile's key quarterly metrics:

Subscribers: T-Mobile lost 510,000 branded contract customers in the first quarter, a figure smaller than its losses in previous quarters. T-Mobile added 249,000 branded prepaid customers during the quarter and 262,000 M2M customers. T-Mobile ended the quarter with 33.4 million total customers, of which 21 million were on the carrier's branded contract plans, 1 million were on its discontinued FlexPay plans, 5 million were on its branded prepaid plans, 3.7 million were from T-Mobile MVNOs and 2.7 million were using M2M services.

Interestingly, Humm said 45 percent of T-Mobile's postpaid gross adds during the quarter were from its Value Plans. On the carrier's Value Plans, customers can bring their own device to the service through a SIM-only model, they can buy their device through T-Mobile for the full price, or they can pay for the phone through 20 equal monthly payments after an initial down payment. A T-Mobile representative said the 45 percent figure Humm provided included all of these scenarios.

ARPU: T-Mobile's average revenue per user for branded, contract customers (excluding M2M) was $58, up $2 from the same quarter a year ago. The carrier's branded prepaid ARPU was $25, up $1 from the year-ago quarter.

Churn: T-Mobile's branded contract churn, excluding M2M customers, declined to 2.5 percent. Its branded prepaid churn (excluding MVNO results) also fell, to 6.4 percent.

Financials: T-Mobile's total revenues fell 2.5 percent year-over-year to $5 billion. The carrier's adjusted OIBDA was $1.27 billion in the first quarter of 2012, down 9 percent from the fourth quarter of 2011 but up 7.2 percent from the first quarter of 2011.

For more:
- see this release
- see this CNET article
- see this Bloomberg article
- see this Wall Street Journal article (sub req.)
- see this Reuters article

Special Report: Wireless in the first quarter of 2012

Related Articles:
Report: Deutsche Telekom may try to merge T-Mobile with MetroPCS
T-Mobile takes aim at AT&T's iPhone in new ad campaign
T-Mobile's Ray: Tower sale could take months, just getting started
T-Mobile picks Ericsson, NSN as its LTE vendors
T-Mobile: Prepaid 'has doubled over the past year'

Article updated May 11 to include details about T-Mobile's Value Plans.