T-Mobile Posts Q4 2010 Results. Reports Loss of 23,000 Customers

We just got a press release from T-Mobile highlighting its results from the 4th Quarter of 2010. The information was released late at night, oddly enough, which indicates T-Mobile likely doesn’t want to attract much attention to the results; but when looking at the overall numbers, there’s really nothing much to boast or sulk about besides staying roughly the same.

Overall, T-Mobile posted a net loss of 23,000 customers. For contract plans the losses were much higher at 318,000, whereas a prepaid addition of 295,000 helped balance that loss out. According to the release, T-Mobile says this is mainly due to revised credit standards (stricter credit checks on new customers?) and a decrease in FlexPay activations “related to competitive intensity”.

The biggest highlight for T-Mobile was the amazing growth it had this year in smartphone use. Data service revenues were $1.29 billion, an increase of 25% year-on-year, mainly due to the number of smartphone users more than doubling; last year 12% of the network’s customers were using smartphones, and that number has now spiked up to 24%. That means over one million customers chose to get a smartphone (that didn’t have one on the network previously). This is a huge jump in one year, and we have a feeling this number will only continue to spike upwards over the next year.

Other notable parts of the press release mention a total churn (customer turnover) was 3.6%, a increase year-on-year from 3.3%. This was primarily driven by prepaid churn. On-contract churn was only 2.5%, which was the same as Q4 2009.

ARPU was also consistent with Q4 2009 as well.

Here’s the full press release:

T-Mobile USA Reports Fourth Quarter 2010 Results

  • Service revenues in the fourth quarter of 2010 at $4.69 billion, up 0.9% compared to the fourth quarter of 2009
  • Blended data ARPU of $12.80 in the fourth quarter of 2010, up 25.5% from the fourth quarter of 2009
  • 8.2 million customers using 3G/4G smartphones as of the fourth quarter, a net increase of 1 million customers in the fourth quarter of 2010
  • OIBDA of $1.34 billion in the fourth quarter of 2010 was comparable to $1.38 billion in the fourth quarter of 2009
  • America’s largest 4G network: T-Mobile USA’s national HSPA+ network now covers 200 million people delivering 4G speeds

BELLEVUE, Wash.–(BUSINESS WIRE)–T-Mobile USA, Inc. (“T-Mobile USA”) today reported fourth quarter of 2010 results. In the fourth quarter of 2010, T-Mobile USA reported service revenues of $4.69 billion compared to $4.65 billion in the fourth quarter of 2009, and OIBDA of $1.34 billion compared to $1.38 billion reported in the fourth quarter of 2009. The number of customers using smartphones continued to increase significantly during the quarter, driving growth in blended data ARPU. Blended data ARPU in the fourth quarter of 2010 was $12.80, up 25.5% from the fourth quarter of 2009. Net customer losses were 23,000 in the fourth quarter of 2010 compared to 371,000 net customer additions in the fourth quarter of 2009.

“Our service revenues increased year-on-year in the fourth quarter. Data ARPU growth rates are outperforming our main competitors as we leverage our 4G network and provide rich and compelling smartphones and data plans. However, high contract churn and significant contract customer losses in the fourth quarter of 2010 indicate that we still have a fair amount of work ahead of us and that any turnaround will take time. With the ongoing implementation of our challenger strategy we are laying the foundation for improved performance going forward,” said Philipp Humm, President and CEO of T-Mobile USA.

“I am pleased with the increase in smartphone adoption and our ongoing improvement in data ARPU. Data growth in the U.S. mobile market continues to accelerate and with the largest 4G network T-Mobile USA is well-positioned to differentiate itself and grow consumer usage. We are not satisfied with contract churn, but we expect that the measures presented at the T-Mobile USA Investor Day in January will lead to improvements in 2011,” said René Obermann, CEO of Deutsche Telekom.

Customers

  • T-Mobile USA served 33.73 million customers (as defined in Note 3 to the Selected Data, below) at the end of the fourth quarter of 2010, down from 33.76 million at the end of the third quarter of 2010 and 33.79 million at the end of the fourth quarter of 2009.
    • In the fourth quarter of 2010, net customer losses were 23,000, compared to net additions of 137,000 in the third quarter of 2010 and 371,000 in the fourth quarter of 2009.
    • Contract customers were the primary driver for the sequential and year-on-year change in net customers.
  • Contract net customer losses were 318,000 in the fourth quarter of 2010, compared to 60,000 net contract customer losses in the third quarter of 2010, and 117,000 net contract customer losses in the fourth quarter of 2009.
    • Sequentially and year-on-year, the decline in net contract customers was driven primarily by fewer contract gross customer additions. Traditional postpay gross customer additions decreased in the fourth quarter of 2010 driven primarily by revised credit standards and competitive intensity. FlexPaySM contract gross customer additions also decreased related to competitive intensity.
    • Connected device net customer additions, included within contract customers (as defined in Note 3 to the Selected Data, below), were lower in the fourth quarter of 2010 than in the third quarter of 2010 and now total 1.9 million at December 31, 2010.
  • Prepaid net customer additions, including MVNO customers (as defined in Note 3 to the Selected Data, below), were 295,000 in the fourth quarter of 2010, compared to 197,000 in the third quarter of 2010 and 488,000 in the fourth quarter of 2009.
    • MVNO customer additions were the primary driver of prepaid net customer additions. MVNO customers totaled 2.8 million at December 31, 2010.
    • Year-on-year, FlexPay No-Contract net customer losses were the primary reason for the decrease in prepaid net customer additions.

Churn

  • Blended churn (as defined in Note 2 to the Selected Data, below), including both contract and prepaid customers, was 3.6% in the fourth quarter of 2010, up from 3.4% in the third quarter of 2010 and 3.3% in the fourth quarter of 2009.
    • The sequential and year-on-year increase was driven primarily by prepaid churn.
  • Contract churn was 2.5% in the fourth quarter of 2010, up from 2.4% in the third quarter of 2010 and consistent with the fourth quarter of 2009.
    • The sequential increase in contract churn was due primarily to higher churn of connected devices in the fourth quarter of 2010 and competitive intensity.
  • Prepaid churn increased in the fourth quarter of 2010 to 7.5% from 7.2% in the third quarter of 2010 and 6.8% in the fourth quarter of 2009.
    • The sequential and year-on-year increase in prepaid churn was driven primarily by MVNO customers.

OIBDA and Net Income

  • T-Mobile USA reported OIBDA (as defined in Note 6 to the Selected Data, below) of $1.34 billion in the fourth quarter of 2010, consistent with $1.32 billion in the third quarter of 2010 and $1.38 billion in the fourth quarter of 2009.
    • Compared to the fourth quarter of 2009, OIBDA decreased slightly due primarily to a higher equipment subsidy loss from more customers upgrading to smartphones (as defined in Note 11 to the Selected Data, below).
  • OIBDA margin (as defined in Note 7 to the Selected Data, below) was 29% in the fourth quarter of 2010, up from 28% in the third quarter of 2010 but down from 30% in the fourth quarter of 2009.
  • Net income in the fourth quarter of 2010 was $268 million, compared to $320 million in the third quarter of 2010 and $306 million in the fourth quarter of 2009.

Revenue

  • Service revenues (as defined in Note 1 to the Selected Data, below) were $4.69 billion in the fourth quarter of 2010, consistent with $4.71 billion in the third quarter of 2010 and up slightly from $4.65 billion in the fourth quarter of 2009.
    • Service revenues in the fourth quarter of 2010 were positively impacted by data revenue growth, driven by the adoption of mobile broadband data plans, the revenue contribution from providing handset insurance services, and higher prepaid revenues from the growth of unlimited usage plans. In the fourth quarter of 2010, T-Mobile USA began directly providing handset insurance services which had previously been provided by a third party.
    • Year-on-year, quarterly service revenues increased due primarily to data revenue growth and from directly providing handset insurance services which more than offset voice revenue declines. The 0.9% increase in quarterly service revenues year-on-year in the fourth quarter of 2010 was an improvement from the 0.5% year-on-year decrease in the third quarter of 2010.
  • Total revenues, including service, equipment, and other revenues were $5.36 billion in the fourth quarter of 2010, consistent with $5.35 billion in the third quarter of 2010 but down slightly from $5.41 billion in the fourth quarter of 2009.
    • Equipment revenues decreased year-on-year due primarily to lower sales volumes.

ARPU

  • Blended Average Revenue Per User (“ARPU” as defined in Note 1 to the Selected Data, below) was $46 in the fourth quarter of 2010, down slightly from $47 in the third quarter of 2010 but consistent with the fourth quarter of 2009.
  • Contract ARPU was $52 in the fourth quarter of 2010, consistent with the third quarter of 2010 and up slightly from $51 in the fourth quarter of 2009.
    • Year-on-year contract ARPU increased as data revenue growth and handset insurance revenues more than offset lower voice revenue.
  • Prepaid ARPU was $19 in the fourth quarter of 2010, consistent with the third quarter of 2010 and up from $18 in the fourth quarter of 2009.
    • The increase in prepaid ARPU compared to the fourth quarter of 2009 was due primarily to the growth of customers on unlimited usage plans.
  • Data service revenues (as defined in Note 1 to the Selected Data, below) were $1.29 billion in the fourth quarter of 2010, up 25% from the fourth quarter of 2009. Data service revenues in the fourth quarter of 2010 represented 28% of blended ARPU, or $12.80 per customer, up from 27% of blended ARPU, or $12.40 per customer in the third quarter of 2010, and 22% of blended ARPU, or $10.20 per customer in the fourth quarter of 2009.
    • 8.2 million customers were using smartphones enabled for the T-Mobile USA UMTS/HSPA/HSPA+ network (as defined in Note 11 to the Selected Data, below) such as the T-Mobile® myTouch® 4G, T-Mobile G2TM with GoogleTM and the Samsung VibrantTM at the end of the fourth quarter of 2010. This was a net increase of 14% or 1 million customers using smartphones from the third quarter of 2010 and more than double the 3.9 million customers as of the fourth quarter of 2009. 3G/4G smartphone customers now account for 24% of total customers, up from 21% in the third quarter of 2010 and 12% in the fourth quarter of 2009.
    • While messaging continues to be a significant component of blended data ARPU, the increase in the number of customers using smartphones and the continued upgrade of the network are driving Internet access revenue growth with the increasing adoption of mobile broadband data plans.

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 $290 in the fourth quarter of 2010, consistent with the third quarter of 2010 but down from $300 in the fourth quarter of 2009.
    • Year-on-year, CPGA decreased in the fourth quarter of 2010 due primarily to the shift in customer base towards MVNO customers and connected devices.
  • The average cash cost of serving customers, Cash Cost Per User (“CCPU” as defined in Note 4 to the Selected Data, below), was $24 per customer per month in the fourth quarter of 2010, consistent with the third quarter of 2010 and up from $22 in the fourth quarter of 2009.
    • Year-on-year, CCPU was higher due primarily to a higher equipment subsidy loss as more customers upgraded to smartphones and the cost of directly providing handset insurance services.

Capital Expenditures

  • Cash capital expenditures (as defined in Note 8 to the Selected Data, below) were $2.8 billion in 2010, compared to $3.7 billion in 2009.
    • The primary reason for lower cash capital expenditures relates to the 2009 build-out of the national UMTS/HSPA network. In 2010 cash capital expenditures were driven by continued network investment including coverage expansion and the upgrade to HSPA+.
  • Cash capital expenditures were $828 million in the fourth quarter of 2010, compared to $643 million in the third quarter of 2010 and $697 million in the fourth quarter of 2009.
    • Sequentially, the increase in cash capital expenditures was due primarily to the build out of the network, including new cell sites and the HSPA+-enabled 4G network upgrade (as defined in Note 10 to the Selected Data, below). With the latest expansion, T-Mobile USA’s 4G network is available in more than 100 major metropolitan areas, reaching 200 million people at the end of 2010.
    • Year-on-year, the increase in cash capital expenditures was due primarily to payment timing differences.

Author: Brad Molen

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