If T-Mobile USA’s first-quarter earnings are any indication, the company really is in need of saving by AT&T, which announced in March it plans to buy out the Deutsche Telekom subsidiary.
T-Mobile lost 471,000 contract customers during the first quarter amid heavy competition from larger postpaid operators. A gain of 372,000 prepaid customers wasn’t enough to offset declines in T-Mobile’s postpaid segment, and the carrier lost 99,000 net customers during the quarter.
“We still have challenges facing our business as evidenced by high contract churn and contract customer losses in the first quarter of 2011,” Philipp Humm, president and CEO of T-Mobile USA, said in the company’s earnings report.
Net income took a nosedive, falling to $135 million in the first quarter from $362 million during the same period last year.
T-Mobile attributed the decline to higher handset subsidies on smartphones and an increase in the depreciation expense for its network. Smartphone customers now comprise 27 percent of T-Mobile’s customers, nearly double from the first quarter of last year.
Data revenues were a bright spot in the company’s earnings, rising 20 percent over last year to $1.33 billion, but were offset by slumping voice revenue. Overall, sales remained flat over last year at $4.63 billion.
Postpaid churn rose two-tenths of a percentage point over last year to 2.4 percent. Prepaid churn improved slightly to 6.7 percent. Postpaid ARPU rose slightly to $52 as data revenue and sales of handset insurance offset lower voice revenue. Prepaid ARPU also rose, coming in at $19.
Rene Obermann, CEO of T-Mobile parent company Deutsche Telekom, said the U.S. carrier’s first-quarter earnings showed a “mixed picture” and pledged the company would work to make improvements as it waited for its merger with AT&T to close.
“Our deal with AT&T announced a few weeks ago will not change the focus of our U.S. business,” Obermann said. “Until the closing of the deal, T-Mobile will continue to challenge its competitors and compete aggressively in the U.S. market.”
T-Mobile plans to boost speeds on its HSPA+ network, which currently covers 200 million people. The company plans to roll out dual-carrier HSPA+ to 140 million customers by mid-2011. More than 9 million T-Mobile customers are currently using smartphones that run on the company’s HSPA+ network.
AT&T is paying $39 billion to acquire T-Mobile in a bid to boost its network capacity. The deal has been derided by Sprint and many of AT&T’s other rivals as anticompetitive, a charge AT&T denies. The merger is currently being reviewed by the Justice Department and the FCC and is expected to close in the first half of 2012.