T-Mobile ended its second fiscal quarter with 50,000 fewer customers than it started with, even as the carrier aggressively upgraded its mobile broadband network to faster 42 Mbps speeds. Average revenues from data plans and contract customers rose, however, leading to a 57 percent gain in net income over the prior quarter but a 50 percent drop from the same period a year ago. The carrier says that 10 million of its 33.6 million customers are now using smartphones, an increase of 50 percent from a year ago.
The amount of customers lost by the No. 4 carrier is mixed news. The good news is that fewer customers were lost in the quarter, compared with the 99,000 that defected earlier this year. But 281,000 contract customers were lost, meaning that the losses were offset by less-lucrative prepaid and wholesale customers. While average revenue per user (ARPU) increased by a dollar, to $53 on the contract side, fewer contract customers muted the revenue gain on a per-customer basis. Adding to the challenge for the quarter was a rise in the cost to acquire a customer: $320 this quarter vs. $300 in the prior. T-Mobile attributes the jump to higher handset subsidies on devices.
Without an iPhone to support its 3G data network, T-Mobile has turned to network improvements and high-end Android (s goog) smartphones to retain and attract customers. The carrier was the first to offer 21 Mbps mobile broadband service in the U.S. and is now in the middle of doubling network speeds again. Offering solid smartphones, such as the HTC Sensation and, more recently, the myTouch 4G Slide with an excellent camera, gives customers appealing options on the fast network. And new value plans for contract customers can save money over rival networks.
Essentially, the carrier is doing everything it can to attract customers without the one tool that AT&T and Verizon now have: Apple’s iPhone.(s aapl) If T-Mobile had convinced Apple to support the carrier’s unique high-speed frequency band, today’s earnings report might have been very different and contract customers could be growing instead of shrinking at T-Mobile. At last check around a million customers were using iPhones with slow service on T-Mobile’s network, roughly 10 percent of the carrier’s current smartphone user base. Imagine what that number would be if the iPhone officially supported T-Mobile’s 4G network.