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T-Mobile Struggles to Compete, Loses Subscribers, Income

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T-Mobile is preparing for a merger with AT&T (s t) which increasingly seems like a good thing for the carrier when you consider its latest quarterly result  T-Mobile USA reported  a loss of 99,000 subscribers in the first quarter, with 471,000 net contract subscribers leaving the carrier, up from 118,000 net contract subscriber losses in the same period a year ago. T-Mobile was able to make up for some of its losses with an increase in less-lucrative pre-paid and MVNO subscribers with 372,000 new pre-paid users, compared to 41,000 new pre-paid subscribers a year ago. Overall, T-Mobile’s subscriber base is 33.63 million customers, down from 33.71 million at the end of the first quarter of 2010.

The carrier said first quarter revenue was flat, at $4.63 billion from the same period a year ago, while net income fell to $135 million from $362 million in the first quarter of 2010.

The numbers for T-Mobile are more troubling in light of the fact that fellow operators AT&T, Verizon (s vz) and Sprint (s s) all had generally positive results in the first quarter. Third-place Sprint, for example, added 1.1 million customers, reduced its churn to record lows and boosted average revenue per postpaid user to $65 from $55 a year ago. T-Mobile’s contract churn was 2.4 percent, up from 2.2 percent a year earlier, while contract ARPU (average revenue per user) was $52, a modest increase from $51 a year earlier, while blended ARPU was $46, flat with the year before.

There were some bright spots for T-Mobile. The carrier said 9.1 million subscribers are using 3G or 4G, an increase of almost 1 million users. Data service revenues came in at $1.33 billion for the first quarter, up 20 percent from the previous year.

Still, T-Mobile continues to struggle against its larger competition. The company said churn, for example, was driven by “continued competitive pressures in the U.S. wireless industry.” The fact that the iPhone arrived on Verizon (s aapl) could have added to T-Mobile’s problems, giving customers a reason to leave. T-Mobile is also having to keep up with its rivals in expanding its network as it ramps up its 4G coverage. Capital expenditures were $749 million in the first quarter, up from $666 million in the same period a year ago, driven by upgrades to a 42 Mbps HSPA+ network.

The tough picture underscores why T-Mobile felt it was good to merge with AT&T. The business of running a competitive wireless network is just getting harder as the cell phone market gets more saturated and T-Mobile tries to keep up with bigger rivals with more devices and resources. T-Mobile said it’s not looking ahead to its possible merger with AT&T and is prepared to compete now in the U.S. market though it continues to face challenges ahead. But with results like this, T-Mobile had better hope its deal with AT&T gets approved.

9 Responses to “T-Mobile Struggles to Compete, Loses Subscribers, Income”

  1. The only concern I have as a current T-Mobile subscriber is that my plan prices will go up. I was originally with Suncom when T-Mo bought them out. I like the GSM cell standard, and I’d looked at other carriers such as AT&T and their prices are higher.

  2. You completely missed the point, the reason that many people didnt sign up for an extra year is because they do not want to be with ATT.

  3. @TedT, if you call a landline # in any country, your VoIP provider needs to use a gateway to connect to the public telephone network. They charge for that function. If it is a VoIP to VoIP call, there is no charge, as it is all on the internet. This is why Google charges for international calls to landlines, and Vonage charges extra.

  4. Ted T.

    @KenG. How would carriers charge for international call if all calls are VoIP? They wouldn’t even know which calls are international. I make all my international call using Skype on my iPhone right now…

  5. There are positive signs in these results. T-Mo is adding data customers, while losing voice subscribers. This seems to imply that their subscriber base is shifting towards more technologically advanced users. Ultimately, when the carriers face up to reality, they will provide voice service over IP, and just charge for data plans and international calls.

    The proposed deal with ATT is good for DT, whether or not it goes through, but bad for T-Mo subscribers and mobile consumers in the US. DT got a good price if it goes through, and it it doesn’t, they get $3B plus spectrum from ATT. T-Mo customers will get downgraded to the carrier with the worst service and highest prices (at least those who stay with ATT will, I’ll be joining Michael in leaving).

    T-Mo is not a sinking ship; it’s just their value is not obvious to most consumers in the US yet. Maybe if they get $3B from ATT, they will be able to communicate that message better.

  6. webvex

    This is the point that seems to be lost on those complaining the merger will hurt competition. T-Mobile is a sinking ship. Their ability to compete is diminishing and it’s going to be a two (or three) horse race anyway.