T-Mobile, Burdened by Subscriber Losses, Reports Lower Q4 Profit
T-Mobile USA’s Q4 profit fell 12.4 percent year-over-year to $268 million. The carrier lost 318,000 contract customers in the quarter, though it more than doubled its smartphone users.
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High contract churn and significant postpaid customer losses in Q4 indicate that “we still have a fair amount of work ahead of us” and that “any turnaround will take time,” T-Mobile USA CEO Philip Humm said in a conference call Friday. Postpaid churn in the quarter was 2.5 percent, up from 2.4 percent in Q3 2010 and flat with a year earlier. Prepaid net additions, including MVNO customers, were 295,000 in the quarter, down from 488,000 in the year-ago quarter. T-Mobile ended the year with 33.7 million customers.
Still, parent Deutsche Telekom remains committed to T-Mobile USA, said Chief Financial Officer Timotheus Hoettges. Executives ruled out selling the business despite its drag on the parent company’s performance. They wouldn’t comment on whether DT plans to create a partnership with Sprint Nextel, but said it has several options in the U.S. and Europe, including spectrum-leasing and network-sharing. Deutsche Telekom CEO René Obermann repeated plans for $1 billion in U.S. expense reductions by 2013. T-Mobile USA is already taking steps to reduce churn in its postpaid base, Humm said. Meanwhile, Deutsche Telekom posted a much wider loss, the equivalent of $800 million, because of impairment charges. But the operator still expects 2011 earnings in line with last year’s.
Some analysts see T-Mobile’s need for more spectrum as urgent. “Ironically, the more successful they are with their strategy, the more customers they will get and the more strain it will put on their network,” said Bernstein Research’s Craig Moffett. “So it will bring the strategic questions to a head all the earlier.” But the company is in a good spectrum position now, Obermann said. He said he will be disappointed if the company doesn’t find a good long-term spectrum solution. With many choices available, the company just needs to take time to nail the right one down, he said. The ideal situation is to figure out network sharing between T-Mobile and Sprint, said BTIG analyst Walter Piecyk.