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Summary:

A quick scan of T-Mobile USA’s second-quarter earnings report, released earlier this morning, makes clear why the company has been banging that marketing drum around the new Google Phone (aka MyTouch) and its 3G data services so loudly these days. It’s seeing its growth stall, its […]

GTMO_12061_158079_v3.jpgA quick scan of T-Mobile USA’s second-quarter earnings report, released earlier this morning, makes clear why the company has been banging that marketing drum around the new Google Phone (aka MyTouch) and its 3G data services so loudly these days. It’s seeing its growth stall, its revenues slow to a crawl and — most importantly — its average revenue per user decline.

T-Mobile USA Q2 ScoreCard.
Revenues $5.34 billion
Net Income $425 million
Total Customers: 33.5 million
ARPU: $48
Data ARPU: $9.90

First let’s look at the second-quarter numbers. The most notable figure is the decline in net new customers, to 325,000 from 415,000 in the first quarter of 2009 and 668,000 in the second quarter of 2008. Of the new adds, 268,000 were low-paying prepaid customers. The declines were “due to higher churn of contract customers,” the company said. Translation: T-Mobile USA is losing high-paying contract customers and replacing them with people who spend less money. As a result, the blended ARPU was $48 in the most recent 3-month period, in line with the first quarter of 2009 but down from $52 in the second quarter of 2008.

In comparison, market leader Verizon added 1.51.1.1 million new subscribers during the second quarter and had an ARPU of $51.1053, and its wireless revenues grew 27.7 percent to $10.5 15.5 billion, largely on the strength of demand for data services. Meanwhile AT&T, the nation’s second-largest carrier, saw its revenues rise 15.8 percent to $12 billion. AT&T’s wireless revenue growth was driven by solid subscriber gains, thanks to the iPhone and an increase in data services usage. (For more, see our Second Quarter 2009 in Review: Mobile report from GigaOM pro, sub required.)

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According to some estimates, mobile revenues will soon eclipse the wireline sales of carriers. T-Mobile USA has been the last of the big four mobile carriers to roll out its 3G network and for the longest time offered only one 3G phone of note — the G1 Google Phone. As a result, it has been slow to get on the data gravy train.

Data services revenue (as defined in Notes 1 and 8 to the Selected Data, below) was $990 million in the second quarter of 2009, representing 20.8% of blended ARPU, or $9.90 per customer, up from 19.6% of blended ARPU, or $9.40 per customer in the first quarter of 2009, and 16.6% of blended ARPU, or $8.60 per customer in the second quarter of 2008. Data services revenue increased 6% compared to the first quarter of 2009 and 23% year-over-year. 2.1 million 3G-capable converged devices (such as the T-Mobile G1, the 3G-enabled Sidekick LX, and the Samsung Behold and Memoir) were on the T-Mobile USA network at the end of the second quarter of 2009, an increase of almost 40% from the first quarter of 2009.

T-Mobile is facing some tough competition. Its rivals have hit devices in their respective arsenals, such as the iPhone, the BlackBerry Tour and the Palm Pre. T-Mobile is betting that the MyTouch will help it beat its rivals, but it will be a tough fight. The third quarter of 2009 is going to bring some interesting surprises. Never before have I looked so forward to seeing the quarterly results of wireless companies.

Related: The GigaOM Interview: Cole Brodman, Chief Technology Officer, T-Mobile USA.

  1. T-Mobile’s killing themselves with extremely limited 3G deployments. Yes, where they have them, they’re getting good speeds and reliability, but it’s not widely available. I live in the state capital of a large state, and 3G’s just not a T-Mobile option here. Even had there been a 3G T-Mo option here, the limited selection of 3G handsets simply isn’t that good.

    Higher ARPU customers have never been TMo’s forte, and their increasing dependence on Walmart as a major rettail partner is not helping them gain high ARPU data customers, who will not accept am EDGE solution. I think TMo will be hard hit if Sprint does indeed launch the HTC Hero in Oct, as has been rumoured. I rely on an unlocked Nokia on TMo, but have to pair it with a EVDO MyFi device. If the Hero launches, TMo will lose me as a voice customer. The Hero looks like a much nicer handset than the vry poorly named mytouch 3G.

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    1. They’ve been rolling out new 3G cities almost daily, so they seem pretty clear on the need to increase their 3G footprint. I almost always have 3G coverage with T-Mobile and I’m pretty happy with it.

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  2. [...] What’s Behind T-Mobile USA Big Bet on Google Phones [...]

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  3. I think they are hurt by not having really hot phones as much as by the late 3G roll-out. Due to their smaller size, phone manufacturers prefer larger providers for their hot phones.

    A pity – T-Mobile has really great customer service and I’d like to see them succeed.

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  4. Here’s how HTC could increase Google voice and Android adoption

    Google voice can work with HTC/Motorola to provide user’s Google voice number as default HTC/Motorola mobile number and a cheaper Android smartphone in the process . Currently, lots of my friends have Google voice number and if they can have an HTC/Motorola phone that is using their Google voice number, it would be more cost effective for everyone.
    From my blog http://people20.blogspot.com , http://docs.google.com/Doc?id=dthcr25_155gbfdnd

    Wrote:
    HTC http://www.htc.com/us/about_htc_bymail.aspx
    Motorola https://www.motorola.com/feedback.jsp

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  5. As much as we wanted to ditch AT&T and move to the Android on T-Mobile, the data network is like moving back to the stone age. And their data plan pricing was worse than any of the other major players. Not sure how they can survive in the current market.

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    1. Huh? What t-mobile store were you in? T-mobile has the absolute cheapest data plan of all the other major players in our area. We shopped around before signing with them. I wonder if prices vary by region or something. Hmmm…
      I also very, very rarely lose 3g service. I can count on one hand the number of times. T-mobile is the best. I hope they make it. :(

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  6. [...] data, with AT&T managing to win over the most new subscribers and the biggest spenders. Thanks, iPhone! But outside of the staid world of the larger carriers, as the economic downturn and cheap plans [...]

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  7. T-mobile is too late to jump on this 3G band(width)wagon. I personally feel they are caught in the middle since they have to now not only think on how to substantially increase there 3G network across the country but also to think about how to keep themselves in race to 4G with LTE and rest just around the corner for other carriers like Verizon, Sprint etc.

    I agree with OM in saying that it would be interesting to see how they play around this in the next few years.

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  8. Jesse Kopelman Friday, August 7, 2009

    Hey Om, Isn’t it like the 5th Anniversary of that piece I wrote for you about what T-Mobile should do? You should re-run it it for nostalgia’s sake. I’m curious to see what people would think of my advice given the current state of the company.

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