T-Mobile loses customers, but ekes out $207M Q2 profit

Its prepaid business continues to do well, highlighting the weakness in its core contract business.

T-Mobile USA

T-Mobile USA continues to bleed its most valuable customers as the carrier struggles to keep up with its fellow national rivals.

The carrier, a unit of Deutsche Telekom, said today it lost 205,000 net customers in the second quarter, largely due to a defection in customers with long-term contracts.

T-Mobile posted a second-quarter profit of $207 million, down slightly from $212 million a year ago. Revenue fell 3.3 percent to $4.88 billion.

The company's subscriber results look a lot like Sprint Nextel's struggles with customer growth over the past few years, with staggering losses on the contract side offsetting progress made on the prepaid and wholesale business. The results underscore the difficult position the carrier finds itself in, pressured on the high end from Verizon Wireless and AT&T, and on the low end from a myriad of prepaid players.

T-Mobile is also without permanent leadership, with CEO Philipp Humm having stepped down in June and interim CEO Jim Alling taking over.

The carrier lost 557,000 net contract customers, seen in the industry as the most lucrative because they sign a long-term contract, and typically pay the highest monthly bills. The decline was wider than its losses from a year ago and in the first quarter. It blamed a program to tighten the credit standards, the phasing out of older devices, and generally weaker environment for potential new customers for the decline.

Slightly offsetting those declines was a net increase of 227,000 prepaid customers, more than triple its year-ago figure. That came as a result of customers switching to its no-contract Monthly 4G program, something it has touted heavily in its commercials.

While the company is also focusing on connecting machines and expanding its wholesale business, growth in the area declined dramatically from a year ago.

Average revenue per user grew year over year on both its contract and prepaid business, although its blended average revenue per user fell due to a higher mix of prepaid and wholesale customers.

The customer turnover rate fell to 2.9 percent from 3.2 percent in the period.

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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