MetroPCS (s PCS) told Wall Street last week that the fourth quarter of 2008 was its most successful quarter ever when it came to adding new customers. This was a reflection of the prepaid carrier’s expansion efforts into new markets, but also a reflection of the economy rendering the $50-and-under contractless cell-phone plans that MetroPCS offers in 14 cities more attractive.
With a total of 5.4 million subscribers, MetroPCS is still much smaller than T-Mobile, the smallest of the nationwide carriers in the U.S. However, MetroPCS has an annual average revenue per user, or ARPU, of $40, compared to a prepaid ARPU of $23 for T-mobile’s prepaid plans and $54 for T-Mobile’s subscribers who sign up for two-year contracts. Below is an edited version of my conversation with MetroPCS COO Tom Keys about his company, the economy and more on MetroPCS’ LTE plans:
GigaOM: So, why is MetroPCS doing so well? Is it simply because it’s cheaper and the economy is down?
Keys: You’re going to see saturation numbers in the wireless market approaching 92 or 93 percent in the U.S., but we’re not going after that 7 or 8 percent. Our value proposition is really to help you cut the cord because of how we cover your home, with in-building penetration so you just need one phone. If you look at the people who have cut the cord, that’s about 20 percent today, so our serviceable market is the 80 percent of people who have yet to cut the cord.
If we then broaden this out to the economy, everyone’s expenses seem to be more difficult today. So we think our cut-the-cord strategy with wireline replacement is absolutely the place to be.
GigaOM: Is your “excellent in-building penetration” a function of your spectrum properties or femtocells?
Keys: It’s a function of design. Our traffic spikes at 9 p.m. and is heaviest between 9 p.m. and 11 p.m., because even on an unlimited plan people just think that that’s when wireless calls are the cheapest. And we know most of those people are stationary, so we understand the value for in-building penetration. In the Northeast, we used a distributed antenna system configuration which allows us to hang nodes 10 feet up in the air, right next to the three-story row homes. We use it to add capacity in our existing markets too.
GigaOM: One of the biggest drawbacks to a plan from a carrier like MetroPCS is that it’s limited to a local calling area. How are y’all addressing that?
Keys: We just signed a deal with Leap Wireless (s LEAP) so inside of that agreement you can now go to 4,000 cities and towns on our $40 or $50 rate plan. Our desire was to take away the last barrier to entry for some people, and that’s mobility. And we also essentially have free texting nationwide. We just got some deals struck that will come out into the public eye pretty soon, but if you’re not in the 4,000 cities, you can still text.
GigaOM: What about competition from other $50 pricing plans backed by nationwide carriers?
Keys: So, let’s start with Boost first. I think this is the 12th unlimited plan that Sprint (s S) has offered. I’ll let them figure out if this is sustainable or not, but we don’t see any issue with it. As for T-Mobile [whose plan requires] 22 months loyalty, what are they trying to do here? Get you two months before your contract expires. That’s not a play against Metro’s customer base or Metro’s customers. This is a save program.
GigaOM: Let’s talk about LTE. What are your plans for that?
Keys: We’re negotiating with infrastructure providers today and working with handset vendors and are well on our way. Our hope is to deploy in the latter part of 2010, but that’s not nailed down. We’re not going to have any stranded assets in the network. Our move to LTE is natural.
GigaOM: Do you have the smartphones or a user base that will take advantage of an LTE network?
Keys: We’ll be launching a smartphone from a Canadian vendor in the second or third quarter of the year. We have very heavy SMS and MMS data usage. We see a tremendous increase in web services because we’ve made apps like Facebook Mobile and MySpace mobile and Loopt available on our network.
GigaOM: Why the rapid move to LTE?
Keys: We think the move into 4G gives us two things. We get capacity, and we get speed. By not stopping or moving to an EVDO Rev A or Rev B and going directly to LTE, we take advantage of our relationships with providers. We were the first to launch an AWS handset in the U.S., so we think our relationships will lead us to LTE rapidly.