T-Mobile USA Announces Q1 2010 Results

Posted on 12. May, 2010 by in Tech News

T-Mobile released their first quarter 2010 earnings results and they don’t look all that bad.  The worst part of them is the fact that they lost 77,000 customers in Q1 compared to Q1 of 2009 when they added 415,000. Everything else seemed to either stay stead or increase slightly.  All in all not a bad quarter for T-Mobile USA.  Full press release with all the juicy financial details below.

BELLEVUE, Wash., May 12, 2010 — T-Mobile USA, Inc. (“T-Mobile USA”) today reported first quarter of 2010 results.  In the first quarter of 2010, T-Mobile USA reported OIBDA of $1.39 billion, compared to $1.38 billion reported in first quarter of 2009. Total customers served declined by 77,000 in the first quarter of 2010 compared to 415,000 net customer additions in the first quarter of 2009.  Additionally, customers using 3G-capable converged devices continued to increase significantly during the quarter.

“As T-Mobile USA continues to drive data as a revenue growth engine, we experienced meaningful traction in the first quarter of 2010 by getting a host of next-generation smartphones into the hands of our customers.  Products like our popular myTouch 3G and HTC HD2, coupled with our industry-leading data value message, continued our strong year-over-year data revenue growth,” said Robert Dotson, President and CEO, T-Mobile, USA.  “We also continue to make real improvements to reduce churn of our most valuable customers, and we are making major leaps in expanding our HSPA+ footprint – the fastest and soon-to-be the most widely available higher-speed network in the country.”

René Obermann, Chief Executive Officer, Deutsche Telekom, said, “T-Mobile USA achieved a slightly higher margin and strong data ARPU, despite a challenging and highly competitive business environment.  In addition, the strong growth in customers with 3G smartphones, plus expanding the HSPA+ network and pipeline of innovative offerings, positions T-Mobile USA to capture the data opportunity in the United States.”

Customers

  • T-Mobile USA served 33.7 million customers at the end of the first quarter of 2010, down from 33.8 million at the end of the fourth quarter of 2009 and up from 33.2 million at the end of the first quarter of 2009.
  • In the first quarter of 2010, total customers served declined by 77,000, compared to net customer additions of 371,000 in the fourth quarter of 2009 and 415,000 in the first quarter of 2009.
  • Compared to the fourth quarter of 2009, the number of net new customer additions decreased due primarily to T-Mobile branded customer losses (total wireless customers excluding mobile virtual network operators (MVNO) and connected devices).  In the fourth quarter of 2009, branded customer additions benefited from strong holiday sales and the launch of the new Even More and Even More Plus rate plans which feature unlimited voice, text and data services.
  • Net contract customer losses were 118,000 in the first quarter of 2010, broadly stable compared to 117,000 net contract customer losses in the fourth quarter of 2009, but down from 160,000 net contract customer additions in the first quarter of 2009.
  • Sequentially, seasonally lower gross additions of branded products were offset by connected device growth.
  • The decrease in contract customer additions compared to the first quarter of 2009 was due primarily to fewer FlexPaysm contract customer additions.
  • Prepaid net customer additions, including MVNO customers, were 41,000 in the first quarter of 2010, down from 488,000 in the fourth quarter of 2009 and 255,000 in the first quarter of 2009.
  • In the first quarter of 2010, lower MVNO net customer additions were the primary reason for the sequential and year-over-year decrease in prepaid additions.  MVNO customers totaled 2.1 million at March 31, 2010.
  • Additionally, seasonally fewer gross branded prepaid customer additions caused lower sequential prepaid net customer additions.
  • Contract customers, including connected devices, comprised 79% of T-Mobile USA’s total customer base at March 31, 2010, consistent with the fourth quarter of 2009 but down from 81% in the first quarter of 2009.

Churn

  • Blended churn, including both contract and prepaid customers, was 3.1% in the first quarter of 2010, down from 3.3% in the fourth quarter of 2009 and was consistent with the first quarter of 2009.
  • Contract churn decreased in the first quarter of 2010 to 2.2% from 2.5% in the fourth quarter of 2009 and 2.3% in the first quarter of 2009.
  • The sequential fall in churn was due primarily to the fourth quarter being seasonally higher due to the holiday season, consistent with previous years.

OIBDA and Net Income

  • T-Mobile USA reported OIBDA of $1.39 billion in the first quarter of 2010, consistent with $1.38 billion in the fourth quarter and first quarter of 2009.
  • In the first quarter of 2010, lower revenues were offset by lower acquisition costs, related to fewer branded customer additions, and sequentially lower advertising spend.
  • OIBDA margin was 30% in the first quarter of 2010, consistent with the fourth quarter of 2009 and slightly up from 29% in the first quarter of 2009.
  • Net income in the first quarter of 2010 was $362 million, compared to $306 million in the fourth quarter of 2009 and $322 million in the first quarter of 2009.

Revenue

  • Service revenues were $4.63 billion in the first quarter of 2010, down from $4.65 billion in the fourth quarter of 2009 and $4.77 billion in the first quarter of 2009.
  • The sequential and year-over-year decrease in service revenues in the first quarter of 2010 was primarily due to net losses of branded customers.
  • Total revenues, including service, equipment, and other revenues were $5.28 billion in the first quarter of 2010, down from $5.41 billion in the fourth quarter of 2009 and $5.40 billion in the first quarter of 2009.
  • The sequential decrease was driven primarily by lower equipment sales compared to the fourth quarter of 2009 which had higher handset sales related to the holiday season.
  • Compared to the first quarter of 2009, the decrease was primarily driven by lower service revenues as described above.

ARPU

  • Blended Average Revenue Per User was $46 in the first quarter of 2010, consistent with the fourth quarter of 2009 but down from $48 in the first quarter of 2009.
  • Contract ARPU was $51 in the first quarter of 2010, consistent with the fourth quarter of 2009, but down from $52 in the first quarter of 2009.
  • Sequentially, contract ARPU was consistent as data revenue growth was offset by decreases in voice revenues.
  • Contract ARPU decreased year-over-year due primarily to a higher proportion of connected devices.
  • Prepaid ARPU was $18 in the first quarter of 2010, consistent with the fourth quarter of 2009 but down from $21 in the first quarter of 2009.
  • The decrease compared to the first quarter of 2009 was due primarily to proportionally fewer FlexPay no-contract customers and a higher number of lower ARPU MVNO customers.
  • Data service revenues were $1.10 billion in the first quarter of 2010, up 18% from the first quarter of 2009.  Data service revenues in the first quarter of 2010 represented 23.8% of blended ARPU, or $10.90 per customer, up from 22.2% of blended ARPU, or $10.20 per customer in the fourth quarter of 2009, and 19.6% of blended ARPU, or $9.40 per customer in the first quarter of 2009.
  • 5.2 million customers were using 3G-capable converged devices (such as the T-Mobile® MyTouchTM 3G, Motorola CLIQ XT™ and BlackBerry® BoldTM 9700) on the T-Mobile USA network at the end of the first quarter of 2010, an increase of 33% from 3.9 million customers as of the fourth quarter of 2009 and a significant increase from 1.5 million customers as of the first quarter of 2009.
  • While messaging revenue continued to be a significant component of data ARPU, the increase of 3G-capable converged devices and the continued expansion and upgrade of the 3G network is driving Internet access revenue growth with the increasing adoption of 3G data plans.

CPGA and CCPU

  • The average cost of acquiring a customer, Cost Per Gross Add was $310 in the first quarter of 2010, up from $300 in the fourth quarter and first quarter of 2009.
  • Sequentially, CPGA increased in the first quarter of 2010 due primarily to a higher subsidy loss from customers adopting more expensive 3G-capable converged devices.
  • The increase in CPGA compared to the first quarter of 2009 was primarily related to increased retail distribution expenses and fewer gross customer additions.
  • The average cash cost of serving customers, Cash Cost Per User (“CCPU”), was $23 per customer per month in the first quarter of 2010, up from $22 in the fourth quarter of 2009 but down from $24 in the first quarter of 2009.
  • Sequentially, CCPU increased due primarily to a higher handset subsidy loss from a greater number of customers upgrading to more expensive 3G-capable converged devices.
  • Year-over-year all components of CCPU (network costs, general and administrative, and subsidy loss unrelated to customer acquisition) decreased due to a higher proportion of MVNO and connected devices incurring lower servicing costs.

Capital Expenditures

  • Cash capital expenditures were $666 million in the first quarter of 2010, compared to $697 million in the fourth quarter of 2009 and $1.13 billion in the first quarter of 2009.
  • The decrease in cash capital expenditures in the first quarter of 2010 compared to the fourth quarter of 2009 was a result of lower network capital expenditures partially offset by payment timing differences.
  • Year-on-year the decrease in capital expenditures was due primarily to higher network expenditures in the first quarter of 2009 as a result of the aggressive build out of the national UMTS/HSDPA (3G) network in 2009, which covers 208 million people as of the end of the first quarter of 2010.
  • In 2010, network capital expenditures will be driven by continued network investment, coverage expansion, and the upgrade to high speed packet access plus (HSPA+) technology, which delivers customers data speeds significantly faster than the current 3G network technology.  By the end of 2010, T-Mobile expects to have HSPA+ deployed across the vast majority of its 3G footprint, covering more than 100 metropolitan areas and 185 million people.

Stick Together Highlights

  • During the first quarter of 2010, T-Mobile USA received the highest ranking in the J.D. Power and Associates 2010 Wireless Retail Sales Satisfaction StudySM – Volume 1. Building on a legacy of recognition reflecting T-Mobile USA’s commitment to delivering an industry-leading retail experience, this is the eighth such top ranking from J.D. Power and Associates in the Wireless Retail Sales Satisfaction Study’s past 11 volumes, dating back to 2004.
  • T-Mobile USA launched the HTC® HD2 which features a comprehensive mobile entertainment experience, offering the largest touch screen on a smartphone in the U.S. and comes ready with access to eBooks, movies, television programs and more.
  • T-Mobile USA is leveraging its nationwide 3G network through new devices such as the DellTM InspironTM Mini 10 netbook and the T-Mobile webConnect RocketTM USB laptop stick.  The Dell Inspiron Mini 10 is T-Mobile USA’s first netbook and features built-in access to T-Mobile USA’s 3G wireless broadband service and Wi-Fi capability.  The T-Mobile webConnect Rocket USB laptop stick provides customers with seamless connectivity to the Internet via Wi-Fi or T-Mobile USA’s 3G wireless network and is the first HSPA+ device from a national U.S. wireless carrier.
  • On April 21, 2010, T-Mobile USA announced the upcoming, exclusive availability of the new GarminfoneTM, the first AndroidTM-powered smartphone fully-integrated with Garmin’s navigation experience.
  • On May 4, 2010, T-Mobile USA announced a new addition to its exclusive line of AndroidTM-powered T-Mobile myTouch 3G smartphones – the T-Mobile myTouch 3G SlideTM.  Anticipated to be available in June, the new myTouch 3G Slide combines a slide-out QWERTY keyboard with a high-performance touch screen powered by the latest Android software.

T-Mobile USA is the U.S. wireless operation of Deutsche Telekom AG (NYSE: DT). 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).

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