T-Mobile grows but its lack of iPhone is still a problem

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Cole Brodman - CMO and EVP, T-Mobile USA at Mobilize 2011T-Mobile is still struggling to find its footing as the smallest major U.S. carrier after its planned acquisition by AT&T fell through. In the first full quarter after the proposed merger was scuttled the nation’s fourth largest carrier managed to gain only 187,000 customers and reported $5 billion in revenue — a 2.5 percent drop from the same period last year.

However, a closer look at the make up of the first quarter of 2012 subscriber numbers shows T-Mo has a mixed mag: the post-paid contract customers that generate the highest and most predictable revenue declined by 510,000, while the average revenue per postpaid user was up by $2 to $58. So T-Mobile has fewer customers but it’s making more money on those it has. What’s really hurting T-Mobile, though, is the lack of an iPhone, which CEO Phillip Hume admitted in the results call.

Unfortunately he declined to speculate on the timing of an iPhone for T-Mobile, and when questioned about not having the device for sale explained that people were activating phones that could work in T-Mobile’s spectrum bands.

On the prepaid side T-Mobile gained 249,000 customers. Hume attributed the growth in that area to the 4G modem products using T-Mobile’s HSPA+ network, which also saw average revenue per user rise by $1 year-on-year to $25 per subscriber.

The company also saw net adds of 262,000 for the quarter from its machine to machine business — a growth area for most carriers, especially in the saturated U.S. market. M2M is a bit more of a precarious business, as one big customer loss can have a huge effect on the subscriptions and revenue per user is lower than traditional subscribers. Profits can be high on a per megabyte basis though compared to the data used, which is why AT&T, Verizon and Sprint are pursuing it so aggressively.

When asked, Hume downplayed the effect of M2M on T-Mobile’s business, as compared with contract customer growth, pointing out the difference in APRU of $58 for a contract customer versus $2 for an M2M customer. The question though is how much money can T-Mobile make per bit delivered to an M2M customers versus a contract customer.

On the financial side, T-Mobile is trying to discontinue cheaper plans and focus on increasing revenue from customers, while also maintaining its credibility as a value player. It is seeing some success in this area, mostly because it is offering a better service than its competitors on the pre-paid side.¬†On the technical side, T-Mobile is continuing with its network modernization plan that will see it deploy LTE by next year. Hume was asked about T-Mobile’s interest in the Verizon spectrum, which he said wouldn’t work for T-Mobile. He was also asked about yesterday’s story on a deal with MetroPCS which he declined to comment on.

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