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T-Mobile: Q3 Subscriber Gains Might Be Short-Lived

11/10/2011 12:33:59 PM Eastern
 Bellevue, Wash. - T-Mobile USA expanded its subscriber base in the third quarter following four consecutive quarters of subscriber-base contraction.

Bbut the launch of the iPhone by four competing carriers could cause the subscriber base to shrink again in the fourth quarter, T-Mobile said.

Because of subscriber gains and "cost discipline," the carrier was able to boost third-quarter net income sequentially and year over year despite declining year-over-year revenues. In the first half, the company cut its employee ranks by an average 6.4 percent compared with the year-ago period.

Net income for the third quarter rose 3.8 percent year over year to $332 million, up from the year-ago $320 million and up sequentially by 56.6 percent from the second quarter's $212 million.

Net income growth came despite a 2.3 percent year-over-year decline in total revenues to $5.23 billion. Sequentially, total revenues rose 3.5 percent from the second quarter's $5.05 billion.

Operating income rose 10.5 percent year over year to $663 million and rose 30 percent sequentially from the second quarter's $509 million.

The carrier's subscriber base at the end of the third quarter rose to 33.7 million, including 2.53 million connected devices, up sequentially from the second quarter's 33.6 million but down from the year-ago 33.8 million.

In its financial report, T-Mobile attributed the sequential gain in net new subscribers to "improvements in both contract and prepaid gross additions resulting from the introduction of unlimited value plans ... and growth of prepaid unlimited monthly 4G plans." That growth, however, "may be impacted in the fourth quarter of 2011 due to competitor launches of the iPhone 4S," the carrier said.

For the coming quarter, "postpay churn, in particular related to the iPhone 4S launches by competitors, will continue to be an area of concern," the carrier added.

Postpay churn was a problem in the third quarter because the company continued to lose branded postpaid subscribers (excluding connected devices) in the quarter. The branded postpay subscriber base shrank by 389,000 to 23.1 million during the quarter, shrank in the first and second quarters, and shrank in fiscal 2010.

In other subscriber segments, T-Mobile posted gains in connected devices, MVNO customers, and branded prepaid customers, whose numbers grew by a net 254,000 following declines in the first and second quarter and in all of 2010.

The number of net new branded prepaid subscribers could post gains in the fourth quarter because T-Mobile added its first prepaid phone in 7-Elecen stores during the third quarter, when it also added a prepaid product in Toys "R" Us and Family Dollar outlets following the July 26 loss of RadioShack as a retailer of T-Mobile's prepaid and postpaid phones.
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