TracFone adds 753,000 subs in Q4 amid Lifeline changes

América Móvil's U.S. MVNO, TracFone Wireless, posted net subscriber gains of 753,000 customers in the fourth quarter, much higher than the year-ago period and better than its net subscriber additions in the first three quarters of 2012. It is unclear if the company was affected earlier this year by regulatory changes to the FCC's Lifeline program, in which TracFone is a key player.

TracFone reported that its subscriber additions were up 52.8 percent from the 493,000 it had in the year-ago period. TracFone ended 2012 with 22.4 million customers, making it by far the largest MVNO in the United States. The company's subscriber base grew 13.3 percent in 2012.

In the fourth quarter TracFone's total revenue jumped 30.8 percent to $1.4 billion, with average revenue per user rising 14.9 percent to $18. The company said its mix of commercial plans continued to shift toward its Straight Talk brand and data revenue is becoming more important. TracFone said data revenues more than doubled over the year-ago period and now account for 36.1 percent of service revenues, which totaled $1.18 billion in the fourth quarter.

That trend is likely to continue now that Straight Talk is providing direct service for the Apple (NASDAQ:AAPL) iPhone. The Straight Talk plan pairs the iPhone, including Apple's latest iPhone, the iPhone 5, with unlimited talking, texting and data starting at $45 per month. The company said that it does not limit subscribers' data usage at a specific threshold; instead, it evaluates customers' data intake on a case-by-case basis and will throttle the speeds of those users who the company deems to be consuming too much data.

TracFone, which also offers service under the Safelink and Net 10 brands, is a major player in the FCC's Lifeline program. The government's Lifeline program was created in order to help low-income Americans obtain telecommunications services--those who qualify can get around $10 per month for cell phone service. During the past few years, companies like Sprint Nextel (NYSE:S) and TracFone tapped into the program with the goal of obtaining new subscribers they could sell additional services to.

However, until last year the FCC did not require carriers to check whether Lifeline subscribers were eligible for the program. Last year the FCC required carriers that receive Lifeline funds certify that their Lifeline subscribers are eligible for the program. The FCC announced Tuesday that savings from its reform of Lifeline are on track to reach at least an additional $400 million in 2013, adding to the more than $214 million saved in 2012. The agency wants to save $2 billion through 2014.

According to an examination by the Wall Street Journal, 41 percent of the roughly six million subscribers in the Lifeline program "either couldn't demonstrate their eligibility or didn't respond to requests for certification." TracFone asked the FCC to keep its counts confidential, the report said.

Throughout 2012, TracFone's U.S. subscriber growth was weak relative to its fourth-quarter numbers. The company had 369,000 net subscriber additions in the first quarter of 2012, well below the 780,000 it added in the first quarter of 2011. In the second quarter, TracFone reported a gain of 1.2 million net new customers, but 1.1 million of those customers came from the company's May acquisition of former T-Mobile USA MVNO Simple Mobile. TracFone added close to 236,000 in the second quarter of 2011. And in the third quarter of 2012, TracFone had 302,000 net adds, down from the 515,000 customers it added in the third quarter of 2011.

For more:
- see this release (PDF)
- see this Reuters article

Special Report: Wireless in the fourth quarter of 2012

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