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T-Mobile just posted their not-so-shocking Q2 numbers. They’re still on a trend they have been for a while: losing customers and making less money, all the more reason for them to say they need AT&T’s help. Overall, T-Mobile lost 50,000 subscribers. This comes from a loss of 281,000 contract subscribers and an addition of 231,000 prepaid customers. All of this accounted for $4.6 billion in service revenues. Although net customer losses are down from 99,000 in the previous quarter, revenue was only down 1.7% compared to Q1’11 ($4.7 billion). Things don’t look absolutely horrible, but T-Mobile seems to be going nowhere fast.
T-Mobile USA Reports Second Quarter of 2011 ResultsAdjusted OIBDA of $1.3 billion in the second quarter of 2011, up from $1.2 billion in the first quarter of 2011 but down from $1.4 billion in the second quarter of 2010Service revenues in the second quarter of 2011 of $4.6 billion, consistent with the first quarter of 2011, but down 1.7% from $4.7 billion in the second quarter of 2010
Contract ARPU of $53 in the second quarter of 2011, up from $52 in the first quarter of 2011 and each of the previous four quarters
Data ARPU of $13.60 in the second quarter of 2011, up $2.00 or 17.2% from the second quarter of 2010
Net customer losses of 50,000, an improvement from 99,000 net customer losses in the first quarter of 2011 and 93,000 net customer losses in the second quarter of 2010
Nearly 10 million customers using 3G/4G smartphones as of the second quarter of 2011, an increase of 50% from the second quarter of 2010
America’s Largest 4G Network™ currently covers over 200 million people in over 190 markets and is being upgraded to even faster speeds (HSPA+ 42), which now covers more than 170 million people in over 100 markets
BELLEVUE, Wash.–(BUSINESS WIRE)–T-Mobile USA, Inc. (“T-Mobile USA”) today reported second quarter 2011 results. For the second quarter of 2011, T-Mobile USA reported service revenues of $4.6 billion, consistent with service revenues in the first quarter of 2011, and adjusted OIBDA of $1.3 billion, up from $1.2 billion reported in the first quarter of 2011. The number of Americans covered by our 4G network and the number of our customers using 3G/4G smartphones both continued to increase significantly during the quarter, driving growth in data ARPU. Additionally, net customer losses were 50,000 in the second quarter of 2011, nearly a 50% improvement from the 99,000 net customer losses in the first quarter of 2011.
“In a challenging market, we are seeing some encouraging trends in the quarter, particularly with our prepaid product growth and our year-on-year contract ARPU increase, thanks to all-time high of 29% of our customer base using 3G/4G smartphones. While contract churn continues to be high, we are focused on upgrading our customers to higher quality products and concentrating on retaining our loyal customers,” said Philipp Humm, President and CEO of T-Mobile USA. “We also continue to focus on customer value through further network upgrades where we now reach more than 170 million Americans with even faster speeds, through our large 4G Android device portfolio, and by offering affordable unlimited rate plans.”
“The United States remains a difficult market for Deutsche Telekom, but we see improvements compared to the first quarter of 2011. T-Mobile USA will continue its strategy with the extended HSPA+ 42 coverage and continued data growth,” said René Obermann, CEO of Deutsche Telekom.
Customers
T-Mobile USA served 33.6 million customers (as defined in Note 1 to the Selected Data, below) at the end of the second quarter of 2011, generally consistent with the first quarter of 2011 and the second quarter of 2010.
In the second quarter of 2011, net customer losses were 50,000, compared to net losses of 99,000 in the first quarter of 2011 and 93,000 in the second quarter of 2010.
In the second quarter of 2011, partner branded customers, representing our Wal-Mart Family Mobile business, were reclassified to the contract category from prepaid as the hybrid product, introduced in the third quarter of 2010, has demonstrated product characteristics more closely associated with T-Mobile USA’s other contract products. Prior quarter amounts have been restated to conform to current period customer reporting classifications.
Contract net customer losses were 281,000 in the second quarter of 2011, an improvement of 26% from the 382,000 net contract customer losses in the first quarter of 2011, but a decline from the 106,000 net contract customer additions in the second quarter of 2010.
Sequentially, the improvement in net contract customer losses was driven primarily by the introduction of new unlimited rate plans in the second quarter and faster growth in our connected device business.
The decline in contract customers in the second quarter 2011 when compared to the second quarter of 2010 was due to intense competitive pressures in the US wireless marketplace and the implementation of strengthened credit standards as part of T-Mobile USA’s focus on improving customer quality.
Additionally, connected device net customer additions, included within contract customers (as defined in Note 1 to the Selected Data, below), were 256,000 in the second quarter of 2011, an improvement of 33% compared to 192,000 in the first quarter of 2011 and 27% compared to 202,000 in the second quarter of 2010. Connected device customers totaled 2.3 million at June 30, 2011.
Prepaid net customer additions, including MVNO customers (as defined in Note 1 to the Selected Data, below), were 231,000 in the second quarter of 2011, down 18% compared to 283,000 in the first quarter of 2011 and up substantially from the 199,000 net losses in the second quarter of 2010.
The sequential decline in prepaid net customer additions was due primarily to fewer FlexPay non-contract gross customer additions which were offset in part by customer growth in traditional prepaid plans.
Year-on-year, prepaid net customer additions increased primarily due to the growth in customers including MVNOs, purchasing prepaid monthly unlimited plans.
MVNO customers continued to grow in the second quarter of 2011, totaling 3.5 million as of June 30, 2011.
Churn
Blended churn (as defined in Note 3 to the Selected Data, below), reflecting both contract and prepaid customers, decreased to 3.3% in the second quarter of 2011 from 3.4% in both the first quarter of 2011 and the second quarter of 2010.
The sequential and year-on-year decrease in blended churn was primarily driven by lower churn from T-Mobile USA branded customers (excluding MVNO and connected devices).
Contract churn was 2.4% in the second quarter of 2011, consistent with the first quarter of 2011 but up from 2.2% in the second quarter of 2010.
The year-on-year increase in contract churn was primarily driven by competitive pressures in the US wireless industry which have continued to negatively impact T-Mobile USA’s contract customer base.
Prepaid churn decreased in the second quarter of 2011 to 6.6%, from 6.7% in the first quarter of 2011 and 7.6% in the second quarter of 2010.
The sequential decrease in prepaid churn was driven by a shift in the customer base towards traditional prepaid products, which was partially offset by higher MVNO churn.
Year-on-year, prepaid churn decreased due to lower traditional prepaid product churn resulting from the success of T-Mobile USA’s recently introduced prepaid monthly unlimited plans.
Adjusted OIBDA and Net Income
T-Mobile USA reported adjusted OIBDA (as defined in Note 8 to the Selected Data, below) of $1.3 billion in the second quarter of 2011, compared to $1.2 billion in the first quarter of 2011 and $1.4 billion in the second quarter of 2010.
OIBDA was adjusted in the second quarter of 2011, to exclude AT&T transaction-related costs of $13 million, primarily consisting of employee-related expenses.
Sequentially, adjusted OIBDA increased due to lower handset subsidies and upgrade expenses in the second quarter of 2011 as compared to the first quarter of 2011, which included more costly customer loyalty initiatives.
Year-on-year, second quarter adjusted OIBDA decreased as a result of lower service revenue as described above. Additionally, higher network expenses related to the continued investment in T-Mobile USA’s 4G network were offset in part by lower volume-driven commission expenses and lower expenses resulting from T-Mobile USA’s Reinvent cost saving initiative program.
Adjusted OIBDA margin (as defined in Note 9 to the Selected Data, below) was 28% in the second quarter of 2011, up from 26% in the first quarter of 2011 but down from 30% in the second quarter of 2010.
Net income in the second quarter of 2011 was $212 million, up 57% when compared to $135 million in the first quarter of 2011 and down 48% from the $404 million reported in the second quarter of 2010.
Sequentially and year-on-year, the changes in net income were driven by the same factors impacting adjusted OIBDA, as described above. Additionally, certain fair value adjustments related to our financial instruments impacted Other expense, net, contributing to the changes in net income.
Revenue
Service revenues (as defined in Note 4 to the Selected Data, below) were $4.6 billion in the second quarter of 2011, consistent with $4.6 billion in the first quarter of 2011 and down 1.7% from $4.7 billion in the second quarter of 2010.
Service revenues in the second quarter of 2011 were positively impacted by data revenue growth, driven by increased adoption of mobile broadband data and unlimited text plans by our customers, seasonally higher roaming revenue and higher prepaid revenues from the growth in monthly unlimited plan adoption. These revenue growth drivers were more than offset by voice revenue declines related to net losses of branded customers, compared to the first quarter of 2011.
Year-on-year, quarterly service revenues decreased primarily due to contract customer losses, which were partially offset by the increased adoption of data plans in our contract and prepaid customer base and from T-Mobile USA directly providing handset insurance services to its customers.
Total revenues, including service, equipment, and other revenues were $5.1 billion in the second quarter of 2011, down from $5.2 billion in the first quarter of 2011 and $5.4 billion in the second quarter of 2010.
Equipment revenues decreased sequentially and year-on-year due primarily to lower handset sales volumes.
ARPU
Blended Average Revenue Per User (“ARPU” as defined in Note 4 to the Selected Data, below) was $46 in the second quarter of 2011, consistent with the first quarter of 2011, but lower than $47 in the second quarter of 2010 driven by a shift in the customer base towards prepaid plans.
Contract ARPU was $53 in the second quarter of 2011, up from $52 in the first quarter of 2011 and each of the previous four quarters.
Sequentially and year-on-year, contract ARPU increased as data revenue growth more than offset lower voice revenue. In addition, the year-on-year increase benefitted from handset insurance contract revenues due to the launch of the directly-provided T-Mobile Personal Handset Protection insurance and warranty program in the fourth quarter of 2010.
Prepaid ARPU was $18 in the second quarter of 2011, consistent with both the first quarter of 2011 and second quarter of 2010.
Data service revenues (as defined in Note 4 to the Selected Data, below) were $1.4 billion in the second quarter of 2011, up 17% from the second quarter of 2010. Data service revenues in the second quarter of 2011 represented 30% of blended ARPU, or $13.60 per customer, up from 29% of blended ARPU, or $13.10 per customer in the first quarter of 2011, and 25% of blended ARPU, or $11.60 per customer in the second quarter of 2010.
In the second quarter of 2011, the increase in the number of customers using smartphones and the continued upgrade of the 3G and 4G networks drove Internet access revenue growth through the increasing adoption of mobile broadband data plans.
9.8 million customers were using smartphones enabled for the T-Mobile USA 3G/4G network (as defined in Note 12 to the Selected Data, below) such as the T-Mobile® myTouch® 4G, T-Mobile® G2x® with Google™, and the Samsung Galaxy S™ 4G at the end of the second quarter of 2011. This represents a net increase of 50% or nearly 3.3 million customers using smartphones from the second quarter of 2010.
3G/4G smartphone customers now account for 29% of total customers, up from 27% in the first quarter of 2011 and 19% in the second quarter of 2010.
Messaging revenue (as defined in Note 5 to the Selected Data, below) also increased sequentially in the second quarter of 2011 with customers moving towards unlimited plans including messaging. Messaging accounted for approximately 35% of total data revenues, compared to 37% in the second quarter of 2010.
CPGA and CCPU
The average cost of acquiring a customer, Cost Per Gross Add (“CPGA” as defined in Note 7 to the Selected Data, below) was $320 in the second quarter of 2011, up from $300 in the first quarter of 2011, but down from $330 in the second quarter of 2010.
Sequentially, CPGA increased in the second quarter of 2011 primarily due to higher handset subsidies as T-Mobile USA offered a variety of incentives to attract customers.
Compared to the second quarter of 2010, CPGA decreased primarily due to lower commission expenses and a shift in the mix of customer additions towards MVNO and connected device customers.
The average cash cost of serving customers, Cash Cost Per User (“CCPU” as defined in Note 6 to the Selected Data, below), was $23 per customer per month in the second quarter of 2011, down from $25 in the first quarter of 2011 and consistent with the second quarter of 2010.
CCPU decreased in the second quarter of 2011 compared to the first quarter of 2011 due to lower equipment subsidies from customer loyalty initiatives than were offered in the first quarter of 2011.
Capital Expenditures
Cash capital expenditures (as defined in Note 10 to the Selected Data, below) were $688 million in the second quarter of 2011, compared to $749 million in the first quarter of 2011 and $682 million in the second quarter of 2010.
Sequentially, the decrease in cash capital expenditures was a result of payment timing differences which were partially offset by an increase in incurred capital expenditures during the quarter. In the second quarter of 2011, incurred capital expenditures were the result of the continued build-out of the HSPA+ 21 and HSPA+ 42 networks (as defined in Note 11 to the Selected Data, below).
Compared to the second quarter of 2010, cash capital expenditures were consistent and continued to be incurred to allow for network coverage expansion and the upgrade to HSPA+ 42.
T-Mobile USA currently offers its customers America’s Largest 4G Network with HSPA+ 21 service available in over 190 markets reaching over 200 million people.
To further improve the value provided to customers through its 4G mobile broadband network, T-Mobile USA has continued to invest in its HSPA+ 42 network, which reached over 170 million people as of the end of the second quarter of 2011, doubling the theoretical speed of its 4G network to 42 Mbps.
T-Mobile USA Recent Highlights
On March 20, 2011, Deutsche Telekom AG and AT&T Inc. entered into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash and stock transaction valued at approximately $39 billion, subject to adjustment in accordance with the agreement. The agreement has been approved by the Board of Directors of both companies, and is expected to provide an optimal combination of network assets to add capacity and provide an opportunity to improve network quality in the near term for the customers of both companies. In particular, the transaction is important to address spectrum constraints and gives T-Mobile USA customers a clear path to take advantage of new generation LTE (Long Term Evolution) services. The transaction is expected to close in the first half of 2012, subject to regulatory approvals and other closing conditions. As part of the transaction, Deutsche Telekom will receive an equity stake in AT&T that, based on the terms of the agreement, would give Deutsche Telekom an ownership interest in AT&T of approximately 8 percent and one seat on the AT&T Board of Directors.
During the second quarter of 2011, and again in July 2011, T-Mobile USA introduced a series of new “Value” rate plans that provide exceptional value and choice to the wireless consumer, reinforcing a focus on making it more affordable for customers to experience America’s Largest 4G Network. These plans include offerings of unlimited talk, text and data services to individuals and families (both with and without handset subsidies).
T-Mobile USA continues to unveil leading devices including the HTC Sensation™ 4G and the myTouch® 4G Slide to leverage America’s Largest 4G Network.
In August 2011, T-Mobile USA announced a new partnership with 7-Eleven Stores, Inc. to provide a prepaid no contract handset and service through the retail chain’s 7-Eleven® stores.
T-Mobile USA is the U.S. wireless operation of Deutsche Telekom AG (OTCQX: DTEGY). In order to provide comparability with the results of other US wireless carriers, all financial amounts are in US dollars and are based on accounting principles generally accepted in the United States (“GAAP”). T-Mobile USA results are included in the consolidated results of Deutsche Telekom, but differ from the information contained herein as Deutsche Telekom reports financial results in Euros and in accordance with International Financial Reporting Standards (IFRS).
This press release includes non-GAAP financial measures. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. Reconciliations from the non-GAAP financial measures to the most directly comparable GAAP financial measures are provided below following Selected Data and the financial statements.
Wow, well I know I was one of them. I left for Verizon. I also wanted to be grandfathered in to their unlimited data plans. Best overall service here in NYC.
k.
I was one of them, got myself an EVO 3D
Thanks for sharing.
I want so badly to like T-Mobile as they have a pretty rockin android lineup (HTC Sensation?) however they seem to be making bad decision after bad decision… why? has the owner really decided to give up? what is the public not seeing? maybe its a ploy… maybe there’s an idea brewing for T-Mo that none of us have thought of. i’m no conspiracy theorist but it can’t just be that simple… they’re a multi-billion dollar industry i can’t see the owner just bumping it off for a quick sale to the least liked carrier in the U.S. . .
FUCK AT&T
Have to wonder how many of these customers left because of the AT&T announcement. Even though it’s not finalized yet, a lot of people I’ve spoken to think it is…
I know it’s not finalized yet, but that on top of many other problems is the reason i left. It seemed like every single month i had a new problem with my account, and the customer service was horrible near the end.
I was just thinking the same thing. If for some reason the merger doesn’t go through (and I hope it doesn’t), T-Mo will have caused a lot of self-inflicted pain with this whole debacle.
I agree with everyone so far. Announcing the buy out by AT&T coupled with AT&T announcing they will throttle top data consumers leaves little reason to stay with TMo. I know many people who have jumped ship for those reasons and no other.
I can only thing of good reasons to stay with T-Mobile. So what if they’re not doing well as a company if their service and prices are good? Let’s even say they go out of business or get bought. What’s the worst that could happen?
I think it is sad to see TMo fade away.
As a customer since 2002 and living in a large city I’ve never had problems with their services. The phone rep has always been helpful and resolved any issues I had.
Reception – living in a large city and traveled around the country and Canada never had a problem making a call. Plus international rocks. I buy a prepaid sim card and good to go. The phone works in just about every gsm country except for Japan.
Pricing wise is pretty darn competitive where’s Verizon nickle and dime you for any additional services like Bank of America.
I hear my friends with that other phone complain about how terrible At&t yet they suffer through with bad service and reception for some Jesus phone. They are just falling on deaf ears here.
T-mobile is a sinking ship and it’s time to abandon now. You can tell that they are starting to give up and not care about there customers, it took me 45 mins the last three times I’ve called to get a person and in my 7 years of being with them it has never taken me that long to get a person. They also took away my credit limit to buy new equipment away last week without even giving me notice. I will be switching soon to sprint most likely and I wouldn’t be surprised if they lost half or more of there remaining customers in the coming months.
That’s exactly what they want us to think. This way the deal will go through.
T-mobile USA wants the deal to go through all the statements they have posted beg people to understand why the deal needs to go through they care nothing about what happens after they are sold. Also has anyone seen the AT&T commercial where they talk about the merger? That is evidence alone that its a done deal.
There we go. It took a while but we got our first conspiracy theorist.
Ya I know what you mean. I’ve actually noticed that they removed the option to get any sort of phone upgrade via contract extensions. I haven’t had to talk to their customer reps but I’ve been seriously debating taking one of those free phones with a new contract somewhere else and paying the early termination fee. I’m holding out because I want to see how a merger really affects things after the fact and decide then. Plus there’s always better phones to choose from for those that wait for the right time.
Yea this same thing has happened to me the last 3-4 times I’ve called it took me 55 minutes to get a person its been absolutely ridiculous. That has never happened to me in my 4 years with T-mo I’d think about leaving but have almost a year on my contract. Anyone have any luck with the clause breaking cause of the increase tax thing??
It really makes me sad because I saw a lot of potential in them….
T Mobile will lose more customers based on the way they are handling the battery drain issue in certain HTC devices. They out right refuse to acknowledge it is a problem and only offer idiotic fixes(replace battery, phone, or just tell you tough!). I’m holding out as long as I can, but at some point, if they don’t fix this problem, I am headed elsewhere.
Yeah…the people leaving aren’t causing the merger…it’s the merger causing people to flee for the exits. Everything I’ve had to do with AT&T has been a disaster. My contract isn’t up with Tmobile for a while. I’m hoping should the merger be finalized first, I can refuse AT&T’s service and get out if they change my plan. For example, I can tether my Tmo phone without extra charges. Will AT&T grandfather me there or will they try to charge me for tethering (regardless of the throttling)? If they charge me, the contract I signed is invalid in my estimation.
I am hanging on waiting for the new Nexus with Ice Cream Sandwich on Sprint then I am out.. Tmobile is just not what it was at one time and this AT&T thing is bs..
I am currently with T-mobile but was thinking about changing to a different provider before hearing about the AT&T merger due to lack of 3g coverage. I get edge most places. AT&T has great 3g coverage but charges way too much and they are slow to release android phones. I’m currently looking at Sprint because I refuse to go to AT&T. I hope sprint has good coverage because I know they have a great unlimited plan!
They can add me to the list soon. Tmobile is the only carrier who isn’t continuing to support their Galaxy S phones. If they don’t want to support a phone that is barely a year old I’ll take my business elsewhere.
My wife and I moved to sprint because of tmobile not acknowledging existing customers and actually charging higher for the phones than that charged for new customers. We had finished out 2 year contract period and 6 months and still were asked to pay 275 for the sensation! besides sprint does not have a data cap.
Uhhh as a loyal customer they offered me $150 for the sensation.
sprint gave us 250 to switch … and we were 8 years with tmo
I’ve been a customer for 7 years and they wanted to charge me 275 also. Sprint just offered me a EVO 3D for 150 and a 125 service credit for switching. Good bye T-mobile you were great until AT&T came and f***ed it all up!
I have had t-mo for at 9 years, and in general have been basically pleased with them. I have my moments, but from what I can tell, everyone has their moment of why they hate their cell phone carrier. My challenge is that where I live in Port Townsend, WA has no 3G coverage and as a result no 4G either, and don’t believe I will ever be on the list to see the upgrade. Coverage matters.
Is this a big surprise most people are running for the hills. I can’t wait until it get closer to the merger and then watch people run. I want no part of At&t my experience with them and Cingular was unreal. Good Luck and Good Bye Verizon here I come! I have four more months to good before bye bye bye
Doesn’t take a rocket scientist to figure why customers are leaving, people are afraid of this potential buyout. I sure am, who wants to buy a phone or update their contract with this hanging over their heads. Many of these people just don’t want anything to do with AT&T. I would bet 90% of those who left went to Verizon or Sprint. This has nothing to do with T-Mobile’s service or Network. I still have a contract with T-Mobile and getting over 9 mb down and over 3 mb up. These speeds are during peak hours. That is called great data speeds. If this buyout was thrown out people would flock back, Guaranteed.
honestly i was with tmobile never had an issue except for service but i went to att cuz at the time att had better phones i cant complain bout tmobile customer service was great att has its issues with customer service and single but it is where i live but i will never go to verizion just cuz of the prices but im probly not leaving att cuz im still under the grandfather clause with data unless they wont let keep my plan then sprint here i come
All this att bashing yet theyre the largest cell company in the usa. What does that say about all these posters?
I don’t get it. I have been with T-Mobile for 7 years nearly. I am military and have been all over the country with very few times I can say I have had issues regarding service. Usually my only problem was no 3G in an area, if i had any issues. I love tmobile. Prices and customer service are hard to match on the other carriers. So why people are dropping and headed else where is beyond me. Granted i will leave myself is the at&t merger happens.
I love T-mobile because they are a company that protects their customer’s private data… unlike Sprint who set up a website to allow law enforcement to browse your records, or AT&T who are practically a government-run company.
But I can’t get a signal from T-mobile in my house, and despite multiple complaints, they waited until the day I cancelled to offer me a signal boosting hotspot. Why would a company not do anything to help you until after you’ve made up your mind to quit?