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

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

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

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.