América Móvil's U.S. TracFone unit reported weaker subscriber growth in the first quarter but also boasted of burgeoning data revenues, a sign that smartphone usage for the MVNO may be taking off.
TracFone, which sells the flat-rate, prepaid Straight Talk service and operates as an MVNO using Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T), T-Mobile USA and Sprint Nextel's (NYSE:S) networks, had 369,000 net subscriber additions in the first quarter, down from 493,000 net additions in the fourth quarter and well below the 780,000 it added in the year-ago quarter. TracFone, which also offers service under the Safelink and Net 10 brands, ended the first quarter with 20.1 million total subscribers, making it easily the largest U.S. MVNO.
TracFone reported total revenue of $1.1 billion for the quarter, up 24.4 percent from the year-ago period. The company said service revenues climbed by a similar margin to $970 million. The unit's EBITDA more than doubled from the year-ago period to $140 million.
TracFone, which began selling Android smartphones on Straight Talk last year, reported that average revenue per user climbed to $16 from $14 in the first quarter of 2011, which the company said reflected a shift toward more high-volume usage plans. Notably, TracFone said data revenues, which it did not break out, rose 44.6 percent year-over-year.
Interestingly, BTIG analyst Walter Piecyk said TracFone's Straight Talk smartphone sales are cutting into the prepaid business of rivals Leap Wireless (NASDAQ:LEAP) and MetroPCS (NYSE:PCS).
"Leap and Metro's largest competitor, América Móvil -owned Straight Talk, decided to start selling smartphones at the end of last year and as usual has been steadily ramping up this effort," Piecyk wrote. "Straight Talk benefits from America Movil's purchasing power, which surpasses Verizon, and therefore does not suffer with the same level of subsidies."
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