T-Mobile OK Q3, 3G Can't Come Soon Enough

T-Mobile USA, a division of Deutsche Telekom (DT), posted solid Q3 results but still lags behind its larger rivals in key areas like ARPU (average revenue per sub) and churn. Release

Key Stats:

  • Revenue: $4.89 billion (up 12% y/y)
  • OIBDA: $1.41 billion (up 15% y/y)
  • Net income: $526 million, down from $1.79 billion in 3Q06 when T-Mobile recorded a $1.5 billion tax benefit
  • Subscribers: 27.7 million (up 15% y/y)
  • Churn: 2.9% overall, 2% postpaid subs (not prepaid)
  • ARPU: $53 overall, $57 postpaid subs
  • Data ARPU: $8.10 (up 37% y/y)

Overall a decent quarter, but a few notable weak points:

T-Mobile is signing up a lower percentage of “postpaid” subs than it used to. Prepaid customers tend to have worse credit than postpaid subs, spend less money on service each month ($18 vs. $57 for postpaid subs) and are less loyal (2.9% overall churn vs. 2.0% postpaid churn). They could drag down results even more in future quarters: 35% of new subs during Q3 were prepaid subs vs. 20% in Q2 and 4% in 3Q06.

Data revenue lags other carriers and T-Mobile badly needs to launch its 3G network. As subscribers spend less money on phone calls, carriers are banking on data revenue (from messaging, email, wireless Web service, ringtones, games, etc.) to lead growth. T-Mobile is the only major carrier without a fast, “3G” data network. Other carriers say their 3G customers spend a lot more on data service than subs on older networks. T-Mobile’s $8.10 Q3 data ARPU lags behinds others’ — AT&T said its postpaid subs spent $11 per month on data service in Q3. T-Mobile spent $4.2 billion on wireless spectrum licenses last year so it could offer 3G service, but as of late September, the government was still sitting on the spectrum.

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