# Post AT&T tryst, T-Mobile’s decline continues

It’s now been two full quarters since its merger with AT&T was scuttled, but T-Mobile USA isn’t showing many signs of recovery. In the first quarter, T-Mobile looked like it might have reversed course, posting a modest 187,000 net customer gain, but in the second quarter it lost 205,000 subscribers, T-Mobile revealed Thursday in its earnings report.

As has been the case for the last two years, T-Mobile’s contract customers are departing. The problem is T-Mo couldn’t replace with them prepaid customers fast enough. T-Mobile lost 557,000 contract subscribers between April and June, offset by 227,000 net new prepaid subscribers.

The U.S. subsidiary of Deutsche Telekom also added 95,000 machine-to-machine connections, linking to its network to everything from point-of-sale payment devices to ice machines, and it gained 30,000 wholesale customers from its mobile virtual network operator partners such as TracFone’s (s amx) Straight Talk. But both numbers were far below the M2M and wholesale gains it reported in previous quarters.

In all, T-Mobile is a smaller operator today than it was a year ago, having shrunk by about 400,000 subscribers since June 2011.

The bright spot for T-Mobile is that its customers are taking to T-Mobile’s ultra-cheap data plans. It sold 2.1 million smartphones in the last quarter, a 31 percent increase over last year’s second quarter. Those new smartphones drove up the  average revenue per user (ARPU) spent on data by 14.6 percent for contract customers, though overall ARPU in postpaid increased only slightly to $57.35 a month. The continued shift of smartphones to prepaid plans, however, increased prepaid ARPU by 13.6 percent to$26.81 a month.

The lack of the iPhone(s aapl) is still weighing heavily on T-Mobile. Though it isn’t working outright miracles for Sprint(s s) since it arrived on its network last fall, the carrier has leaned on the iPhone to deliver quarterly subscribers boosts. The Apple device is responsible for many of the defections to Sprint from other carriers.

T-Mobile has made no official announcement on the iPhone, but it is in the process of overhauling its network, which will make its network completely iPhone-compatible by next year. The sooner it gets the device, though, the sooner it has a key weapon in fighting off its much larger competitors.

If you want to learn more about T-Mobile’s aggressive network plans, check out GigaOM’s Mobilize conference next month where T-Mobile CTO Neville Ray is speaking on Sept 21.

T-Mobile image courtesy of Flickr user swruler9284