T-Mobile slumps in Q1, loses 77,000 subscribers

T-Mobile USA reported weaker results in the first quarter, with subscriber losses returning as questions persisted about the carrier's 4G network strategy. The carrier's parent company, Deutsche Telekom, said it remains open to working with another operator for a next-generation network, but declined to provide specifics.

Deutsche Telekom reported a net profit of $972.8 million for the quarter, a sharp swing upward from its $1.4 billion net loss in the year-ago quarter, when its earnings were weighed down by goodwill charges on its U.K. business. DT is no longer talking about an initial public offering for T-Mobile USA, and its long-term plans for the company remain uncertain.  

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

Subscribers: T-Mobile reported a net subscriber loss of 77,000, a stark reversal of the 415,000 subscriber additions it reported in the first quarter of 2009, and also down from the 371,000 net additions it had the fourth quarter. However, T-Mobile also recorded a loss of 77,000 subscribers in the third quarter of last year. T-Mobile said its first quarter decline compared with the fourth quarter was primarily due to losses of T-Mobile-branded customers. Net contract subscribers losses were 118,000 in the first quarter, roughly even with the 117,000 net contract customer losses in the fourth quarter of 2009, but down sharply from T-Mobile's 160,000 net contract subscriber additions in the first quarter of 2009. The company also struggled on the prepaid front; prepaid net customer additions, including MVNO customers, came in at 41,000 in the quarter, down from 488,000 in the fourth quarter and 255,000 in the first quarter of 2009. T-Mobile had 33.7 million subscribers at the end of the quarter.

Financials: The carrier reported net income in the quarter of $362 million, up slightly from the $306 million it notched in the fourth quarter and $322 million in the first quarter of 2009. Total revenue clocked in at $5.28 billion in the first quarter of 2010, down from $5.41 billion in the fourth quarter and $5.40 billion in the first quarter of 2009. Service revenues were $4.63 billion, down slightly from $4.65 billion in the fourth quarter and $4.77 billion in the year-ago period.

Churn: Contract churn decreased to 2.2 percent, down from from 2.5 percent in the fourth quarter and 2.3 percent in the first quarter of 2009.

ARPU: Blended average revenue per user was $46, in line with the fourth quarter but down from $48 in the first quarter of 2009.

Data: Data service revenue came in $1.10 billion, up 18 percent from the first quarter of 2009. Data service revenues in the first quarter of 2010 represented 23.8 percent of blended ARPU/$10.90 per customer, up from 22.2 percent of blended ARPU/$10.20 per customer in the fourth quarter and 19.6 percent of blended ARPU/$9.40 per customer in the first quarter of 2009. The company had 5.2 million smartphone customers on its network, up 33 percent from the fourth quarter. The company aims to have 8 million smartphone users by year-end. Additionally, by year-end T-Mobile  expects to have HSPA+ deployed across the vast majority of its 3G footprint, covering more than 100 metropolitan areas and 185 million people.

4G: Deutsche Telekom CEO Rene Obermann declined to comment on a recent Financial Times report that said T-Mobile was holding preliminary talks with Harbinger Capital Partners to become a wholesale customer of its proposed LTE network. However, he said T-Mobile USA needs to be open to cooperation on 4G, "for instance with other network operators, where one could share the network in certain regions," because capital expenditures "would be huge if you plan to cover a large area. So we need to remain open to that, there's no question." T-Mobile reportedly has also had discussions about being a wholesale provider with WiMAX carrier Clearwire.

For more:
- see this release
- see this FierceWireless Q1 earnings page
- see this WSJ article (sub. req.)
- see this Bloomberg article

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