TracFone bleeds 192K subs in Q2 as América Móvil shuts off inactive accounts

América Móvil's U.S. MVNO, TracFone Wireless, lost 192,000 subscribers in the second quarter as part of a company-wide effort within the parent firm to shut off the service of inactive users.

TracFone's total subscriber base fell to 23.04 million, down from 23.23 million at the end of the first quarter. The total subscriber base is still up 8 percent from a year ago at the end of the second quarter.

The company said the disconnects were due to "changes of the commercial conditions of certain plans." According to Bloomberg, América Móvil adopted stricter rules for how long a phone line can go unused and still count as a subscriber.

The change resulted in the company losing 15 percent, or 1.9 million, of its subscribers in Peru, 307,000 customers in Ecuador and 100,000 in Chile. 

In May, TracFone acquired Start Wireless' Page Plus Cellular, an MVNO that counts around 1.4 million customers in the United States. Page Plus was primarily an MVNO of Verizon Wireless (NYSE:VZ). The action was TracFone's second major acquisition after its purchase of T-Mobile US (NYSE:TMUS) MVNO Simple Mobile and its 1 million customers in the spring of 2012.

As with Simple Mobile, América Móvil did not disclose the terms of its purchase of Page Plus. The Mexican company said it expects the transaction to close in the second quarter, pending regulatory approvals. However, the company did not mention the acquisition in its second-quarter earnings report. América Móvil is owned by Mexican billionaire Carlos Slim.

In other second-quarter metrics for TracFone, América Móvil said revenues rose 37.3 percent year-over-year to $1.5 billion, as service revenue grew 35.6 percent thanks in large part to data revenues that increased 66.2 percent. Data revenue now represents 42 percent of TracFone's service revenues, which the company said have been growing steadily over the last four quarters.

Average revenue per user rose 19.2 year-over-year to $19 from $16. and traffic per subscriber jumped 29.1 percent to 532 minutes per month. Churn held steady at 4.1 percent.

TracFone posted EBITDA of $156 million, which was up 11.5 percent year-over-year and was equivalent to 10.4 percent of revenues.

TracFone, by far the largest U.S. MVNO, uses Verizon, AT&T Mobility (NYSE:T), Sprint  (NYSE:S) and T-Mobile's networks. Part of the growth in data volume may be due to TracFone's embrace of Apple's (NASDAQ:AAPL) iPhone.

In January, TracFone's prepaid Straight Talk brand starting selling Apple's iPhone, including the LTE-capable iPhone 5, coupled with unlimited talking, texting and data starting at $45 per month--significantly cheaper than what other carriers charge. Although neither company has confirmed the relationship, Verizon likely provides service to Straight Talk's iPhones. Straight Talk also supports existing GSM iPhones that users port to the service. The 16 GB iPhone 5 for Straight Talk sells for the full price of $650, while the 16 GB iPhone 4S goes for $550 and the 8 GB iPhone 4 goes for $450.

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

Special Report: Wireless in the second quarter of 2013

Related Articles:
AT&T sells part of its stake in TracFone owner América Móvil for $564M
Walmart exec: TracFone's Straight Talk is 'one of the best-kept secrets' in wireless
TracFone acquires Verizon MVNO Page Plus Cellular and its 1.4M customers
TracFone's Q1: 839K net adds, rising revenues and increasing ARPU
TracFone's Telcel America to leverage América Móvil ties with cheap calling to Mexico

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