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T-Mobile USA Posts Q2 Subscriber Surge, Net Loss

Bellevue, Wash. – T-Mobile USA’s net new subscriber additions surged in its second quarter on the strength of its LTE rollout, aggressive “uncarrier” strategy and iPhone launch, but the initiatives produced a sharp rise in operating expenses that produced an operating loss and net loss for the quarter.

The number of net new subscribers surged by 1.13 billion, almost double that of the first quarter’s surge of 579,000, and compared with a year-ago loss of 205,000 subscribers. The number of branded net adds (postpaid and prepaid combined) surged 678,000 compared with a first-quarter gain of only 3,000.

More important, the number of branded postpaid net adds surged to 688,000 compared with a first-quarter loss of 199,000 and a year-ago loss of 557,000.

The subscriber numbers exclude subscribers of MetroPCS, which T-Mobile acquired on April 30. Those subscribers will be included as T-Mobile-branded prepaid customers in the third-quarter results. The company’s second-quarter revenues, operating profit and net loss, however, include MetroPCS data.

The quarter follows a first quarter in which the number of net new T-Mobile subscribers also surged, though only by 579,000, and the company posted first-quarter net income of $107 million following two consecutive quarters of net losses.

In the first quarter, the company gained more net new subscribers than it did in all of 2012.

In the second quarter of 2013, revenues surged to $6.2 billion from a first-quarter $4.68 billion and year-ago $4.89 billion.

Operating expenses, however, surged to $6.06 billion from a first-quarter $4.3 billion and a year-ago $4.4 billion.

As a result, operating income fell to $181 million from the first-quarter’s $379 million and from the year-ago $452 million.

The company posted a second-quarter net loss of $16 million compared with first-quarter net income of $107 million and a year-ago net of $207 million.

The company’s operating expenses surged for multiple reasons, including increased handset purchases resulting from the subscriber surge and from a growing share of more expensive smartphones in the mix. Handset purchases rose to $1.9 billion compared with the first quarter’s $886 million and the year ago’s $745 million.

Customer acquisition expenses rose 39 percent from the first quarter to $1 billion and rose 37 percent from the year-ago period, mostly because of “increasing commission costs driven by higher sales volumes and increased advertising expenses to promote T-Mobile’s uncarrier no-contract service contracts message and the April launch of the iPhone 5,” The company said.

Capital expenditures rose 95 percent compared with the year-ago period to $1.1 billion, though fell 2 percent from the first quarter, as a result of the company’s LTE rollout and network modernization, the company said.