T-Mobile loses 515,000 postpaid subs in Q4, sets sights on iPhone, MetroPCS deal

T-Mobile USA closed out the fourth quarter of 2012 with mixed results, adding 61,000 net subscribers in the quarter as prepaid and wholesale customer additions offset a net loss of 515,000 postpaid subscribers, which continues to be the No. 4 carrier's greatest weakness. However, T-Mobile is looking ahead to its merger with MetroPCS (NYSE:PCS) and getting Apple's (NASDAQ:AAPL) iPhone as it remakes itself this year.

T-Mobile parent Deutsche Telekom posted a net profit of $1.04 billion in the fourth quarter, up from a $1.76 billion loss a year ago when it had to book a $3 billion impairment charge on T-Mobile USA. "We are looking forward to the merger of T-Mobile USA and MetroPCS," Deutsche Telekom CEO René Obermann said in a statement. "This combination will substantially benefit the shareholders and customers of both companies by creating the leading wireless value carrier with expanded scale, spectrum and financial resources to compete across the entire U.S. market."

Similarly, T-Mobile took the attitude of looking past the fourth quarter and toward the new opportunities it argues lie ahead in the form of both the merger as well as T-Mobile's improved spectrum position and network.

There has recently been some unrest from some of MetroPCS' shareholders, including the largest single MetroPCS shareholder--hedge fund Paulson & Co.--which indicated its uneasiness with the deal earlier this month. Nevertheless, MetroPCS said Tuesday that it had scheduled a special meeting for shareholders to vote on the deal March 28. Under the terms of the deal, MetroPCS will engage in a reverse merger with T-Mobile, and Deutsche Telekom will own 74 percent the combined company, which will be public. MetroPCS will also declare a 1-for-2 reverse stock split and pay $1.5 billion in cash to its shareholders. Some investors have said MetroPCS shareholders should get a greater share of the combined entity. T-Mobile said it expects the deal to close in early April.

T-Mobile is itching to fully launch its strategy to be the so-called "un-carrier" among the Tier 1 operators, a plan that has been given new vitality under CEO John Legere. "T-Mobile finished 2012 on a strong note, providing a foundation for executing even bigger game-changing moves in 2013," he said in a statement. "As the 'Un-carrier,' our promise is simple. You will see us put customers at the center of everything we do going forward, and that means giving them fair and simple wireless experiences in a way that other carriers never have before."

In addition to launching Apple devices, T-Mobile will stop offering pricing plans that come with traditional device subsidies and will move exclusively to its Value postpaid plans, which allow customers to pay the full cost of a device upfront in exchange for a lower monthly rate. Alternatively, customers can pay off the cost of their devices in monthly installments over the course of 20 months.

T-Mobile also will soon launch its LTE network and said networks in Las Vegas and Kansas City, Mo., have been completed and are ready to be lit up. The carrier plans to cover 100 million POPs with LTE by mid-2013 and 200 million by year-end. T-Mobile has said that with MetroPCS' AWS spectrum in hand it will be able to launch LTE with 2X20 MHz spectrum channels in many markets.

Here is a breakdown of T-Mobile's key quarterly metrics:

Subscribers: T-Mobile reported net postpaid subscriber losses of 515,000 postpaid customers in the quarter, which is higher than 492,000 contract customers it lost in the third quarter of 2012 but lower than the 706,000 it lost in the fourth quarter of 2011. The company also had 166,000 net prepaid customer additions in the fourth quarter, fewer than the 365,000 from the third quarter and 220,000 from the year-ago period. T-Mobile also notched 410,000 wholesale subscriber additions in the fourth quarter, which includes MVNO and machine-to-machine figures. T-Mobile said it had MVNO additions of 275,000 during the quarter, an almost five-fold increase from the year-ago period. The 410,000 figure is a significant improvement from the 40,000 wholesale customer losses T-Mobile reported in the fourth quarter of 2011 and also above the 287,000 wholesale additions from the third quarter of 2012.

T-Mobile ended the year with 33.3 million total customers, marking the first time since 2009 that its total subscriber base has not declined year-over-year for a full year; T-Mobile added a net 204,000 customers in 2012.

ARPU: T-Mobile's branded postpaid average revenue per user was $55.47, down from $56.59 in the third quarter and $58.20 in the year-ago period.  Branded prepaid ARPU was $27.69, up from $27.35 in the third quarter and up 11.2 percent from the year-ago period, reflecting strong adoption of T-Mobile's higher-priced Monthly 4G plans.

Interestingly, T-Mobile said 1.3 million customers chose its Value plans during the fourth quarter, and that it now has more than 6 million customers, or 30 percent of its branded postpaid subscriber base, on its Value plans, an increase from 23 percent at the end of the third quarter.  T-Mobile also revealed that around 100,000 iPhone customers every month--likely from AT&T  Mobility (NYSE:T)--are switching to T-Mobile under the BYOD plans, bringing the total number of iPhone users currently on the T-Mobile network to more than 2 million.

Churn: Branded contract churn was 2.5 percent, a marked improvement from 3.1 percent in the year-ago quarter. The carrier did not report branded prepaid churn.

Financials: T-Mobile said total revenue for the quarter clocked in at $4.91 billion, with service revenue making up $4 billion of the total. Both figures were down year-over-year, with total revenue off 5.2 percent and service revenue down 9.2 percent. However, total revenue did improve sequentially for the second straight quarter.  T-Mobile said branded contract revenue declined sequentially by 4.3 percent to $3.4 billion and 13.9 percent year-on-year, reflecting the increased sales of Value plans and the loss of branded contract customers.

For more:
- see this release
- see this DT presentation (PDF)
- see this Bloomberg article
- see this Dow Jones Newswires article
- see this Engadget article

Special Report: Wireless in the fourth quarter of 2012

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