TracFone adds 25K subs in Q2 as parent América Móvil unveils roaming-free service for U.S.

América Móvil's U.S. MVNO, TracFone Wireless, added just 25,000 net subscribers in the second quarter, only a slight improvement over the anemic growth the company experienced in the year-ago period. In the second quarter of 2014, the company had added just 8,000 customers.

TracFone ended the second quarter of 2015 with 25.713 million total customers, up from 25.688 million at the end of the first quarter. The subscriber additions TracFone notched in the second quarter are better than the company's results in the first quarter of 2015, when TracFone lost 318,000 total customers, which it blamed largely on disconnections it had to make related to its participation in the federal Lifeline phone program.

In a brief statement, América Móvil said that its Lifeline product, SafeLink Wireless, "showed solid growth in the quarter and our new brand Total Wireless appears to be gaining more traction." Total Wireless launched in March exclusively through Walmart, and it is likely partnering with Verizon Wireless (NYSE: VZ), though the company did not confirm it is a Verizon MVNO. What sets Total Wireless apart from some of its MVNO brethren is that it lets customers purchase data that doesn't expire after a month.

TracFone reported revenue in the second quarter of $1.69 billion, down 1.2 percent year-over-year. The company reported a sharp 19.8 percent drop in equipment revenues, down to $109 million, from a year ago. The company said service revenues were almost flat at $1.58 billion. Average revenue per user was flat at $21 per month and churn increased slightly in the quarter to 4.7 percent from 4.5 percent a year ago.

Perhaps more significant than TracFone's results is parent América Móvil's announcement of its "Sin Fronteras" Plan ("No Borders Plan"). Under the plan, its postpaid Telcel subscribers in Mexico will be able to make calls from Mexico to the U.S. that will be charged as a local call, with no long distance charges. Further, while in the U.S. postpaid Telcel customers will be able to use the minutes, SMS and data under their plans as if they were in Mexico, with no roaming charges. All postpaid subscribers are eligible to get this plan, which is priced at $3.15 (50 Mexican pesos) per month, including taxes.

The plan is significant because of its similarity to T-Mobile US' (NYSE:TMUS)  recently launched "Mobile without Borders" offer, under which T-Mobile lets customers make calls, texts and use data as they do in the U.S. when they travel to Mexico and Canada. T-Mobile said this week its MetroPCS prepaid customers will get those benefits while in Mexico. MetroPCS customers who add the "Mexico Unlimited" offering to their plan on or before August 31 will get it at for free through the end of 2015; after that, the service will cost $5 per month per line.

T-Mobile has not said who its Mexican roaming partner is on its plan but it could very well be América Móvil.

América Móvil CEO Daniel Hajj said the carrier plans to invest $6 billion in its Mexican network over the next three years, likely in response to AT&T's (NYSE: T) incursion into Mexico. After spending $4.4 billion to purchase Mexican wireless operators Iusacell and Nextel Mexico earlier this year, AT&T last month promised to spend $3 billion during the next four years to cover 100 million people in Mexico with LTE by the end of 2018. AT&T has said it is creating the "first-ever North American Mobile Service Area covering 400 million people and businesses in Mexico and the U.S."

For more:
- see this release (PDF)
- see this Bloomberg article
- see this Reuters article
- see this WSJ article (sub. req.)

Special Report: Wireless in the second quarter of 2015

Related articles:
FCC pushes TracFone to start unlocking handsets as part of settlement
TracFone leans on FCC to make changes to Lifeline program
Survey paid for by TracFone-funded group finds support among older Americans for maintaining Lifeline program
América Móvil's TracFone loses 318K subs in Q1, partially due to Lifeline changes
Total Wireless, likely a Verizon MVNO, sells rollover data offerings through Walmart

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