MetroPCS says 25% of its customers use smartphones

Executives defend its strategy, which includes offering prepaid plans with no lock-in, as the company posts disappointing second-quarter results.

MetroPCS' smartphone strategy is paying off, its president said today, after the company reported disappointing second-quarter results.

MetroPCS

A fourth of MetroPCS' customers use smartphones already, and 38 percent of its customers are tied to a family plan, Chief Operating Officer Thomas Keys said during a conference call with analysts.

"The growth has been driven by increasing interest in smartphones," Keys said.

Keys' comments were a defense against questions raised by Wall Street over the company's customer growth and rate of turnover, which both left investors wanting. The company attributed the weakness to normal seasonal pressure and the continued weak economic environment.

MetroPCS earlier today reported a new profit of $84 million, or 23 cents a share, up from $80 million, or 22 cents a share, a year ago. Revenue rose 19 percent to $1.21 billion from $1.01 billion during the year-earlier period.

More importantly, investors looked at the number of net new customers added in the period. It added 199,000 customers, well below the 254,000 Wall Street had expected. The rate of turnover also increased to 3.9 percent, higher than the consensus estimate of 3.4 percent.

The turnover rate, also known as churn, is a particularly sensitive subject because its prepaid customers can leave at any time. The model is different from that of a traditional national carrier, which locks its customers to long-term contracts.

But Keys said the higher number of smartphones sold in the past few quarters would help alleviate the increase in customer turnover. Likewise, the higher number of family plan customers will also help. Keys said nearly half of all new customers have signed up for family plans. Carriers like family plans because members of the plan are tied to a single carrier, making it difficult for one to switch.

Also of concern is the uncertainty the company faces in the coming months. Executives warned that many of the pressures it has been facing will return in the third quarter.

"Management appears to have limited visibility regarding subscriber trends, thus increasing investor uncertainty," said Michael Nelson, an analyst at Mizuho Securities.

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