Surging T-Mobile Taking Advantage of Sprint Slide
No. 4 U.S. carrier T-Mobile continued to close the subscriber gap with Sprint Nextel, beating the No. 3 carrier in net additions for the fifth consecutive quarter. T-Mobile added 857,000 -- 55,000 more than it added in Q3 2006 and about 1.2 million more than Sprint, which reported a net loss in the quarter. T-Mobile has 28 million customers, slightly more than half Sprint’s 54 million wireless subscribers. The trend seems likely to continue: This month, Sprint said it expected to keep having problems Q4 (CD Nov 2 p6).
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T-Mobile’s total revenue rose 12 percent year-over-year to $4.89 billion and spending dropped 8 percent to $500 million. Operating income jumped 15.1 percent from Q3 2006 to $1.41 billion. The growth was driven by net adds and increased revenue per user, it said.
Reduced churn and popular service add-ons drove net adds, T-Mobile said. The carrier reduced post-paid churn to 2 percent, a 0.3 percentage point improvement from Q3 2006 spurred mainly by the introduction of two-year contracts in Q2 2006, T-Mobile said. Meanwhile, T-Mobile increased myFaves subscribers to 3.5 million from 2.5 million. MyFaves, which offers free calling to five people on any wireless network, owes its success to a “trend toward personalizing communications and the use of social networks,” said T-Mobile’s parent, Deutsche Telekom. T-Mobile’s Wi-Fi handoff service, HotSpot@Home, should perpetuate the carrier’s customer growth, T-Mobile USA CEO Robert Dotson said: “This service opens up an important new growth area for our company to go after: the displacement of landline telephone service with T-Mobile service.”
Strong data messaging revenue growth drove revenue per user, which increased $1 year-over-year to $53. T-Mobile said. Total text messages skyrocketed to almost 21 billion, more than twice the 10 billion recorded in Q3 2006. Meanwhile, winning customers was cheaper, with customer acquisition cost down 7 percent from Q3 2006 to $280.
T-Mobile said it has received antitrust approvals for its $1.6 billion SunCom Wireless acquisition. The deal, expected to close during the first half of 2008, still needs FCC and SunCom shareholder approval. The SunCom acquisition is part of Deutsche Telekom’s plan “to strengthen further its position” in the U.S., DT said. “We will systematically remain on the lookout for acquisition opportunities of this kind,” DT CEO Rene Obermann said.
T-Mobile phones with Google’s open-source Android software platform are coming next year, DT said. “Customers should expect the first phones based on Android to be available in the second half of 2008,” it said.
T-Mobile USA’s strong revenue greatly helped DT’s quarterly results. “The mobile communications business outside Germany remains the main growth engine,” the parent said. Germany-based DT reported a 1.4 percent year-over-year increase in revenue to about $23 billion. International revenue comprised more than half at $11.85 billion, up 14 percent from Q3 2006. DT domestic revenue went the opposite direction, sinking 9.3 percent to $11.15 billion. International revenue from T-Mobile USA and T-Mobile UK will be “major drivers” for DT mobile revenue and earnings growth the rest of 2007, DT said.
DT continues to “focus, fix and grow,” a strategy announced last March, it said, announcing Thursday an agreement to sell its T-Systems Media&Broadcast GmbH business to the French TDF group for $1.25 billion. The business’s portfolio comprised terrestrial broadcasting equipment and connection networks, and satellite transmission services. DT did not specify a closing date for the transaction, which is subject to antitrust approvals.
DT will also continue downsizing Germany staff, it said. “The immense changes in Deutsche Telekom’s market environment, in particular the rapid technological change, are forcing it to adjust its workforce structure by cutting jobs in a socially responsible manner,” DT said. “This will be implemented using voluntary instruments such as partial retirement, severance payments and early retirement.”