T-Mobile USA, Inc. ("T-Mobile USA") today reported third quarter 2011 service revenues of $4.67 billion, slightly down from $4.71 billion in the third quarter of 2010, and adjusted OIBDA of $1.45 billion, up from $1.32 billion reported in the third quarter of 2010. Additionally, net customer additions were 126,000 in the third quarter of 2011, a 176,000 improvement from net customer losses in the second quarter of 2011 of 50,000 and slightly down from 137,000 net customer additions in the third quarter of 2010.
"Earnings improved as we continued to focus on making smartphones affordable to all Americans through our unlimited Value plans, improvements to our 4G network, and an expanding portfolio of 4G devices," said Philipp Humm, President and CEO of T-Mobile USA. "Attractive prepaid offerings helped us add customers in the third quarter of 2011 and data ARPU grew as smartphone adoption continued to increase. Discipline on the cost side contributed to year-on-year margin improvement, while postpay churn, in particular related to the iPhone 4S launches by competitors, will continue to be an area of concern."
"I am pleased with the development of adjusted OIBDA in the third quarter of 2011. The increase, partly thanks to successful cost saving initiatives, is a positive sign in a still challenging environment," said Rene Obermann, CEO of Deutsche Telekom.
Total Customers
-- T-Mobile USA served 33.7 million customers (as defined in Note 1 to the Selected Data, below) at the end of third quarter of 2011, compared to 33.6 million customers at the end of second quarter 2011 and 33.8 million customers at the end of third quarter 2010.
-- Third quarter 2011 net customer additions of 126,000, compared to a net customer loss in the second quarter of 2011 of 50,000, and net customer additions of 137,000 in the third quarter of 2010. -- During the second and third quarters of 2011, as part of T-Mobile USA's strategy of providing simple, value-based customer offers, T-Mobile USA introduced new unlimited Value plans for individuals, families and businesses, which resulted in improvement in net contract customer losses during the quarter.
-- The quarter-over-quarter improvement in net customer additions was driven by improvements in both contract and prepaid gross additions resulting from the introduction of unlimited Value plans discussed above and growth of prepaid unlimited Monthly 4G plans. This growth may be impacted in the fourth quarter of 2011 due to competitor launches of the iPhone 4S.
Contract Customers
-- Contract net customer losses, including connected devices (as defined in Note 1 to the Selected Data, below), were 186,000 in the third quarter of 2011, an improvement from 281,000 net contract customer losses in the second quarter of 2011. Net contract customer losses were 54,000 in the third quarter of 2010.
-- Branded contract net customer losses, excluding connected devices, were 389,000 in the third quarter of 2011, an improvement of 147,000 net branded contract customer losses from 536,000 in the second quarter of 2011. Net branded contract customer losses improved 64,000 in the third quarter of 2010. -- Sequentially, the improvement in net contract customer losses was driven primarily by higher gross additions related to the new unlimited Value plans.
-- The year-over-year change was primarily due to fewer branded contract gross customer additions resulting in part from the implementation of strengthened credit standards as an aspect of T-Mobile USA's focus on improving the overall quality of its contract customer base. Additionally, customer migrations from prepaid products as a result of the strategic phase out of certain hybrid plans contributed to the year-on-year growth in net branded contract customers.
-- Connected device net customer additions were 204,000 in the third quarter of 2011 compared to 256,000 in the second quarter of 2011 and 271,000 in the third quarter of 2010. Connected device customers, which have significantly lower ARPUs (averaging less than $2) than other contract customers, totaled 2.5 million at September 30, 2011.
Prepaid Customers
-- Prepaid net customer additions, including MVNO customers (as defined in Note 1 to the Selected Data, below), were 312,000 in the third quarter of 2011, an improvement from 231,000 net prepaid customer additions in the second quarter of 2011, and 190,000 net prepaid customer additions in the third quarter of 2010.
-- Branded prepaid net customer additions, excluding MVNO customers, were 254,000 in the third quarter of 2011, up 325,000 from second quarter 2011 branded prepaid net customer losses of 71,000, and improved by 333,000 from 79,000 net branded prepaid customer losses in the third quarter of 2010. -- The sequential and year-on-year growth in branded prepaid net customer additions was due primarily to growth in unlimited Monthly 4G prepaid plans.
-- MVNO customers increased slightly in the third quarter of 2011, totaling 3.5 million as of September 30, 2011. In the third quarter of 2011, net MVNO customer growth was lower compared to the second quarter of 2011 and the third quarter of 2010 due to higher MVNO customer churn.
Churn
-- Blended churn (as defined in Note 3 to the Selected Data, below), reflecting both contract and prepaid customers, increased to 3.5% in the third quarter of 2011, up from 3.3% in the second quarter of 2011 and 3.4% in the third quarter of 2010. -- The sequential and year-on-year increase in blended churn was primarily driven by higher churn from MVNO customers.
-- Churn from branded customers was 3.2% in the third quarter of 2011, consistent with the second quarter of 2011, and an improvement from 3.4% in the third quarter of 2010. The year-on-year decrease was primarily due to improvement in branded prepaid churn as a result of unlimited Monthly 4G prepaid plans.
-- Contract churn, including connected devices, was 2.4% in the third quarter of 2011, consistent with the second quarter of 2011 and the third quarter of 2010. -- To address contract churn, T-Mobile USA continued to focus on loyalty efforts during the quarter, including re-contracting its most loyal customers.
-- Prepaid churn, including MVNO, increased to 7.2% in the third quarter of 2011, from 6.6% in the second quarter of 2011 and was consistent with the third quarter of 2010. -- The sequential increase in prepaid churn was driven primarily by higher MVNO deactivations.
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