Mobile

T-Mobile bulks up as new customers gobble pizza freebies and more

The aggressive No. 3 carrier once again leads the industry in the critical area of adding customers.

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CEO T-Mobile John Legere talking about its T-Mobile Tuesdays freebie program.

Claudia Cruz/CNET

Never underestimate the power of free pizza.

When T-Mobile in early June launched its freebie program, which gave away pizza, streaming movies and, for some, shares of the company, it likely didn't have a sense of how quickly its customers would embrace the idea. Its T-Mobile Tuesday app crashed on launch day. The free pizza giveaway overwhelmed partner Domino's, and the pizza chain backed out of the program.

Not that any of this halted T-Mobile's momentum. The carrier replaced Domino's with a $15 voucher for a Lyft ride and earlier this month said that blockbuster hit game Pokemon Go wouldn't count against its customers' data for a year.

The perks offered through T-Mobile's Un-carrier campaign continue to lure in new customers and foster loyalty among existing ones through the brand. The latest evidence: the company's second-quarter results, which saw a gain of 646,000 net new postpaid phone customers, or folks who pay at the end of the month. The turnover rate for postpaid customers, meanwhile, fell to a record low 1.27 percent.

The Un-carrier campaign has helped T-Mobile lead the industry in growth, at times outstripping all of its competitors in the critical metric of new phone customers. Its success underscores how little gestures, including free pizza, can have a big impact on a company like T-Mobile, which remains a much smaller rival to telecom giants Verizon Wireless and AT&T.

In comparison, Verizon said Tuesday that it had added just 86,000 phone customers. AT&T lost 180,000 postpaid customers in the period.

While T-Mobile wouldn't say specifically how its T-Mobile Tuesday app benefited the company, Chief Operating Officer Mike Sievert noted that "Un-carrier 11" was the most talked about move, garnering 6.6 billion social impressions.

In total, T-Mobile logged 1.9 million total net additions, helped by its prepaid and wholesale business. Its total postpaid customer growth of 890,000, which includes connected devices like tablets, actually fell from a year ago and the first quarter. The company blamed the result on "the absence of iconic device launches in the period."

It's likely Sprint also had an impact. The company, in the middle of its own turnaround effort, on Monday said it signed up 173,000 customers, reversing losses from a year earlier. It has been aggressive in promoting service plans that promise to halve your phone bill.

In a sign of continued momentum, Legere said T-Mobile had already added 25 percent more customers in July than Sprint did in the second quarter. Executives said the hype over Pokemon Go (Legere is on level 8 of the hit game and a member of Team Instinct) and its related promotion likely drove interest in its T-Mobile Tuesday app, which has been downloaded 5 million times.

T-Mobile expects continued momentum throughout the year, and raised its 2016 forecast for postpaid net new customers to between 3.4 million and 3.8 million, up from a prior range of 3.2 million to 3.6 million.

The nation's third-largest carrier posted a profit of $225 million, or 25 cents a share, on revenue of $9.22 billion.

Analysts, on average, had forecast earnings of 20 cents a share on revenue of $9.03 billion, according to Yahoo Finance.

T-Mobile shares rose 1.1 percent to $45.46.

Updated at 11:11 am PT: With additional comments from executives.