T-Mobile 

T-Mobile released its second-quarter earnings report today. Check out these numbers:

  • Revenue is up to $4.7 billion this quarter, and increase from $4.63 billion in Q1, but a decrease from Q2 2009's $4.77 billion
  • 6.5 million users have 3G phones, up 25% from Q1 2010
  • T-Mobile's HSPA+ service covers 85 million Americans with 4G-like speeds
  • There was a decline of 93,000 in the number of total subscribers, compared to a gain of 325,000 in Q2 2009
  • Total customer numbers now stand at 33.6 million
  • About 200,000 prepaid customers were lost in Q2, while just over 100,000 contract customers were added

So, a mix of good and bad for America's No. 4 wireless provider. As contract customers have (on average) higher monthly bills, the net loss of those prepaid customers isn't quite so bad. Also, these numbers don't reflect the launch of the Samsung Vibrant, which by all indications has sold quite well for T-Mobile. Plus, TMO is supposed to be announcing their first fully HSPA+ compliant device soon and a rumored dual-core Snapdragon phone might be coming, both of which should give them something to brag about. Full presser after the break.

T-MOBILE USA REPORTS SECOND QUARTER 2010 RESULTS

$4.70 billion service revenues in the second quarter of 2010, an increase from $4.63 billion in the first quarter of 2010, but down from $4.77 billion in the second quarter of 2009
Blended data ARPU of $11.60 in the second quarter of 2010, up from $10.90 in the first quarter of 2010, and $9.90 in the second quarter of 2009
6.5 million customers using 3G-capable smart phones as of the second quarter of 2010, a 25% increase from the first quarter of 2010
T-Mobile USA’s national 3G network covers 208 million people and the HSPA+ network upgrade now covers 85 million people delivering 4G speeds (as defined in Note 11 to the Selected Data below), including service in New York, Seattle, Los Angeles and Las Vegas
OIBDA of $1.42 billion in the second quarter of 2010, compared to $1.39 billion in the first quarter of 2010, but lower than $1.60 billion in the second quarter of 2009
Total customers served declined by 93,000 in the second quarter of 2010, compared to 77,000 net customer losses in the first quarter of 2010, and 325,000 net customer additions in the second quarter of 2009


BELLEVUE, Wash., August 5, 2010 -- T-Mobile USA, Inc. (“T-Mobile USA”) today reported second quarter of 2010 results. In the second quarter of 2010, T-Mobile USA reported service revenues of $4.70 billion up from $4.63 billion in the first quarter of 2010, and OIBDA of $1.42 billion compared to $1.39 billion reported in the first quarter of 2010. Total customers served declined by 93,000 in the second quarter of 2010 compared to 77,000 net customer losses in the first quarter of 2010, but with positive net traditional postpay customer additions which are included within contract customers. Additionally, customers using 3G-capable smart phones continued to increase significantly during the quarter, driving blended data ARPU growth.

“In the second quarter of 2010, customers embraced T-Mobile USA’s industry leading value which makes it simple and affordable for consumers to trade-up to next generation products and services,” said Robert Dotson, President and CEO, T-Mobile, USA. “The number of 3G smartphones in the hands of our customers year-over-year has tripled to 6.5 million supported by a network that offers the broadest reach of 4G speeds in the U.S. as our growth continues through data revenues.”

René Obermann, Chief Executive Officer, Deutsche Telekom, said, “T-Mobile USA soundly delivered on its aggressive HSPA+ network build out and roadmap execution in the second quarter; together playing a large role in driving strong data ARPU, as well as achieving contract customer growth and improved service revenue trends.”

Customers

T-Mobile USA served 33.6 million customers (as defined in Note 3 to the Selected Data, below) at the end of the second quarter of 2010, down from 33.7 million at the end of the first quarter of 2010 and up from 33.5 million at the end of the second quarter of 2009.

In the second quarter of 2010, total customers served declined by 93,000, compared to a net decline of 77,000 in the first quarter of 2010 and net customer additions of 325,000 in the second quarter of 2009.
Sequentially and year-on-year, the number of net new customer additions decreased due primarily to fewer net prepaid customer additions.

Contract net customer additions were 106,000 in the second quarter of 2010, compared to 118,000 net contract customer losses in the first quarter of 2010, and 56,000 net contract customer additions in the second quarter of 2009.

Sequentially and year-on-year, the increase in net contract customer additions was driven primarily by improvements in net traditional postpay customer additions, which were positive in the second quarter of 2010 and benefitted from a variety of incentive offers.
Connected device customers, included within contract customers (as defined in Note 3 to the Selected Data, below), totaled 1.5 million at June 30, 2010 and continued to grow significantly during the second quarter of 2010.

Prepaid net customer losses, including MVNO customers (as defined in Note 3 to the Selected Data, below), were 199,000 in the second quarter of 2010, compared to 41,000 net prepaid customer additions in the first quarter of 2010 and 268,000 net prepaid customer additions in the second quarter of 2009.

In the second quarter of 2010, lower MVNO net customer additions were the primary reason for the year-over-year decrease in prepaid net customer additions. MVNO customers totaled 2.1 million at June 30, 2010.
Sequentially, prepaid net customer additions declined in the second quarter of 2010 due primarily to higher prepaid churn as discussed below.


Churn

Blended churn (as defined in Note 2 to the Selected Data, below), including both contract and prepaid customers, was 3.4% in the second quarter of 2010, up from 3.1% in the first quarter of 2010 and the second quarter of 2009.
Contract churn was 2.2% in the second quarter of 2010, in line with the first quarter of 2010 and second quarter of 2009.
Prepaid churn increased in the second quarter of 2010 to 7.6% from 6.8% in the first quarter of 2010 and 7.0% in the second quarter of 2009.

The sequential increase in prepaid churn was due primarily to competitive intensity impacting traditional prepaid and MVNO customers.


OIBDA and Net Income

T-Mobile USA reported OIBDA (as defined in Note 6 to the Selected Data, below) of $1.42 billion in the second quarter of 2010, up slightly from $1.39 billion in the first quarter of 2010 but down from $1.60 billion in the second quarter of 2009.

Sequentially, higher service revenues (discussed below) were partially offset by a higher equipment subsidy loss driven in part by a variety of incentive offers and as customers adopt more costly 3G-enabled smart phones.
Compared to the second quarter of 2009, OIBDA decreased due to lower service revenues from fewer branded customers and a higher equipment subsidy loss.

OIBDA margin (as defined in Note 7 to the Selected Data, below) was 30% in the second quarter of 2010, consistent with the first quarter of 2010 but down from 34% in the second quarter of 2009.
Net income in the second quarter of 2010 was $404 million, compared to $362 million in the first quarter of 2010 and $425 million in the second quarter of 2009.


Revenue

Service revenues (as defined in Note 1 to the Selected Data, below) were $4.70 billion in the second quarter of 2010, up slightly from $4.63 billion in the first quarter of 2010, but down 1.4% from $4.77 billion in the second quarter of 2009.

The sequential increase in service revenues was due primarily to data revenue growth, driven by the adoption of 3G data revenue plans and higher roaming revenues, partially offset by lower voice revenues.
Year-on-year, service revenues declined due primarily to fewer branded customers. However, the -1.4% rate of decline year-on-year in the second quarter of 2010 was an improvement from -3.0% year-on-year in the first quarter of 2010.

Total revenues, including service, equipment, and other revenues were $5.36 billion in the second quarter of 2010, up from $5.28 billion in the first quarter of 2010 and $5.34 billion in the second quarter of 2009.

Compared to the first quarter of 2010, the increase in total revenues was driven primarily by higher service revenues as described above.
Compared to the second quarter of 2009, the increase in total revenues was due primarily to higher equipment sales as customers adopt 3G-capable smart phones, which was partially offset by lower service revenues as described above.


ARPU

Blended Average Revenue Per User (“ARPU” as defined in Note 1 to the Selected Data, below) was $47 in the second quarter of 2010, up from $46 in the first quarter of 2010 but down from $48 in the second quarter of 2009.

Blended ARPU increased sequentially for the first time since the second quarter of 2008 driven by contract ARPU growth.

Contract ARPU was $52 in the second quarter of 2010, up slightly from $51 in the first quarter of 2010, and consistent with the second quarter of 2009.

The sequential increase in contract ARPU was driven by data revenue growth, partially offset by lower voice revenues.

Prepaid ARPU was $18 in the second quarter of 2010, consistent with the first quarter of 2010 but down from $21 in the second quarter of 2009.

The decrease compared to the second quarter of 2009 was due primarily to proportionally fewer FlexPaySM no-contract customers and a higher proportion of lower ARPU MVNO customers.

Data service revenues (as defined in Notes 1 and 9 to the Selected Data, below) were $1.17 billion in the second quarter of 2010, up 18% from the second quarter of 2009. Data service revenues in the second quarter of 2010 represented 25.0% of blended ARPU, or $11.60 per customer, up from 23.8% of blended ARPU, or $10.90 per customer in the first quarter of 2010, and 20.8% of blended ARPU, or $9.90 per customer in the second quarter of 2009.

6.5 million customers were using 3G-capable smart phones (such as the T-Mobile® MyTouchTM 3G Slide, HTC HD2 and BlackBerry® BoldTM 9700) on the T-Mobile USA network at the end of the second quarter of 2010, an increase of 25% from 5.2 million customers as of the first quarter of 2010 and more than tripling from 2.1 million customers as of the second quarter of 2009. 3G-capable smart phone customers now account for 19% of total customers, up from 15% in the first quarter of 2010 and 6% in second quarter of 2009.
The increase in customers using 3G-capable smart phones and the continued expansion of the upgrade of the 3G network are driving Internet access revenue growth with the increasing adoption of 3G data plans. Additionally, messaging continues to be a significant component of blended data ARPU.




CPGA and CCPU

The average cost of acquiring a customer, Cost Per Gross Add (“CPGA” as defined in Note 5 to the Selected Data, below) was $330 in the second quarter of 2010, up from $310 in the first quarter of 2010 and $270 in the second quarter of 2009.

Sequentially and year-on-year, CPGA increased in the second quarter of 2010 due primarily to a higher subsidy loss as T-Mobile USA offered a variety of incentives and as customers move towards purchasing more costly 3G-capable smart phones.

The average cash cost of serving customers, Cash Cost Per User (“CCPU” as defined in Note 4 to the Selected Data, below), was $23 per customer per month in the second quarter of 2010, consistent with the first quarter of 2010 and second quarter of 2009.

Sequentially and year-on-year, CCPU was consistent as a higher handset subsidy loss from a greater number of customers upgrading to more expensive 3G-capable smart phones was offset by lower network costs.


Capital Expenditures

Cash capital expenditures (as defined in Note 8 to the Selected Data, below) were $682 million in the second quarter of 2010, compared to $666 million in the first quarter of 2010 and $1.08 billion in the second quarter of 2009.

Year-on-year the decrease in capital expenditures was due primarily to higher network expenditures in the second quarter of 2009 as a result of the aggressive build out of the national UMTS/HSPA (3G) network in 2009, which covers 208 million people as of the end of the second quarter of 2010.

The upgrade to high speed packet access plus (HSPA+) technology, which delivers customers 4G data speeds (as defined in Note 11 to the Selected Data, below), now covers 85 million people, in markets such as New York, Seattle, Los Angeles, Washington D.C. and Las Vegas.



Stick Together Highlights

During the second quarter of 2010, Robert Dotson, president and chief executive officer of T-Mobile USA, announced his intent to transition to new opportunities in 2011 after 15 years of service with the company. In order to ensure a smooth transition of leadership, Dotson has committed to stay actively engaged in the business until May 2011. His designated successor is Philipp Humm, an experienced DT executive and former CEO of T-Mobile Germany. Humm was last responsible for sales and service in Europe as chief regional officer (CRO) Europe. After a period of transition with Dotson, Humm will take over as CEO of T-Mobile USA in February 2011, while Dotson will remain on as a non-executive board member until May 2011.
T-Mobile now offers 4G speeds (as defined in Note 11 to the Selected Data, below) to more people than any other network in the country reaching nearly 50 major metropolitan areas across the country. T-Mobile is on track to deliver HSPA+ speeds in 100 major metropolitan areas, covering 185 million people in the U.S. by the end of this year. Complementing the network expansion is a wider availability of the webConnectTM Rocket USB Laptop Stick and the Dell InspironTM Mini 10. Additionally later this summer, T-Mobile will unveil its first HSPA+ capable smart phone.
On June 19, 2010, T-Mobile USA celebrated Father’s Day with an unprecedented industry-first promotion that offered a free cell phone to new contract family plan customers, including customers adding a line to an existing family plan.
On July 29, 2010, T-Mobile USA received the highest ranking among national wireless carriers in the J.D. Power and Associates 2010 Wireless Customer Care Performance StudySM — Volume 2. The award further reflects T-Mobile’s commitment to providing an outstanding customer experience, whether in-store, online or on the phone.


T-Mobile USA is the U.S. wireless operation of Deutsche Telekom AG (OTCQX: DTEGY). In order to provide comparability with the results of other US wireless carriers, all financial amounts are in US dollars and are based on accounting principles generally accepted in the United States (“GAAP”). T-Mobile USA results are included in the consolidated results of Deutsche Telekom, but differ from the information contained herein as Deutsche Telekom reports financial results in Euros and in accordance with International Financial Reporting Standards (IFRS).

 

Reader comments

Mixed bag for T-Mobile's Q2 numbers

4 Comments

Doesn't sound impressive. I don't see how they can seriously compete with Verizon and AT&T, or even Sprint.
T-Mobile needs to do something big or give up. Something big would be for them to buy Sprint. Otherwise, stop wasting money and pull out of the US.

I'm just informing you that they Can't buy Sprint. That offer is way out the door. It's the other way around now, as reported, Sprint has sent t-mobile a letter about Sprint buying t-mobile. But they rejected the offer from sprint, so now they left to stand on there own. Let the captain go down with his ship. Standing high and proud.

I think it's clear that the American market wants cool phones. A lot of people advise others not to go to a carrier for a phone, but hey, it happens everyday, and T-Mobile will stay in 4th place if they don't follow suit. at&t has the iphone. Verizon has the droid lineup. Sprint has the evo and others. T-Mobile has the Vibrant, but so does everyone else. As far as an exclusive phone that creates a name for itself and attracts attention, T-mobile just gets thrown a bone every once in a while. The whole family and cheap prices thing helped them build a niche market, but its become stagnant. Peoples wallets speak very clearly. The average consumer these days is probably buying a top smartphone, and the other 3 carriers have much better options. Hopefully the new Ceo and the leaked road map represent change in the right direction.