T-Mobile adds 1.1 million net new customers as growth returns

T-Mobile posts solid results in its first earnings report as a publicly traded company, with 688,000 "post-paid" customers signing up in the period. But the company swung to a loss.

John Legere at T-Mobile event July 10, 2013
John Legere at a T-Mobile event in July. Sarah Tew/CNET

T-Mobile returned to subscriber growth for the first time in more than two years.

The company revealed Wednesday that it added a net 1.1 million customers in the second quarter, with 688,000 (685,000 coming from phone customers) coming from its post-paid, or customers with a higher credit rating score that pay at the end of each month. That's the highest rate of growth among all of the national carriers this period. It added another 8.9 million customers from its acquisition of MetroPCS.

In total, the company ended the second quarter with 44 million customers. In the year-ago period, it lost a net 557,000 post-paid customers. For the full year, T-Mobile expects to add a net 1 million to 1.2 million post-paid customers, suggesting continued growth -- albeit at a slower pace -- for the rest of 2013.

That growth is coming at a cost. Even as revenue rose 27.5 percent to $6.23 billion -- above Wall Street expectations -- it swung to a loss of $16 million, compared with a year-earlier profit of $207 million.

T-Mobile's adjusted earnings before interest, taxes, depreciation, and amortization fell by 16 percent to $1.1 billion from a year ago. Excluding one-time items, adjusted earnings actually fell by 30 percent to $1.3 billion, largely because of the promotional expenses, higher customer growth and handset sales, and higher upgrade volumes.

T-Mobile expects full-year adjusted earnings, including the MetroPCS assets, to be between $5.2 billion and $5.4 billion.

The results mark the first time T-Mobile reported financial performance as an independent company. The company in May spun out of former parent Deutsche Telekom and merged with MetroPCS to become its own publicly traded entity . Because of the unusual nature of the combination and spin-off, there isn't a good year-over-year comparison for financial results.

T-Mobile's aggressive subscriber growth can be attributed to the introduction to the iPhone, as well as a series of aggressive moves to change up its business model. In March, T-Mobile said it was doing away with service contracts, switching to a model where customers would have to pay for the entire cost of the device, but would in exchange get a lower monthly rate. In July, the company upped the ante by pushing a program that allowed customers to upgrade their phone up to twice a year.

The initiatives are part of CEO John Legere's push to be a more aggressive company and to shake up the status quo of the industry.

T-Mobile said its average revenue per user for its core branded service fell 6.5 percent to $53.60 due to the adoption of the lower priced Value and Simple Choice plans. The carrier cut the price of its service plans when it opted to eliminate contracts, foisting the burden of paying for the phone to the customer.

Its prepaid average revenue per user rose 29.7 percent due to the inclusion of MetroPCS's results. Excluding one-time items, the average revenue would have risen 0.7 percent to $35.97.

T-Mobile is the smallest of the four national carriers, but is the most vocal. The company had been behind in its 4G LTE deployment but has quickly made up ground over the past few months, now covering roughly as many markets as Sprint. Both carriers are still well behind AT&T and Verizon Wireless, which lead the way with LTE coverage.

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About the author

Roger Cheng is the executive editor in charge of breaking news for CNET News. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade. He's a devoted Trojan alum and Los Angeles Lakers fan.

 

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