T-Mobile loses contract subscribers, but holds fort for now

T-Mobile managed to hold its position in the third quarter, but still faces a rough road ahead as the only major U.S. carrier without Apple's iPhone.
Written by Larry Dignan, Contributor

In a quarter marked by uncertainty over its merger with AT&T, T-Mobile added net subscribers in the third quarter, lost contract customers and kept churn rates steady.

However, T-Mobile CEO Philipp Humm said in a statement that the upcoming quarter may be challenging due to rivals' iPhone 4S launches, which "will continue to be an area of concern."

Simply put, T-Mobile managed to hold its position, but still faces a rough road ahead as the only major U.S. carrier without Apple's iPhone. Humm indicated that churn rates---currently higher than the percentages posted by AT&T, Verizon and Sprint---could creep higher.

Related: T-Mobile: Is there a plan B without an AT&T sale?

The company added 126,000 net customers in the third quarter just shy of the 137,000 added in the year ago quarter. However, T-Mobile's customer additions were largely focused on value and prepaid plans. T-Mobile lost 186,000 contract customers---called postpaid by other carriers. If you include losses in connected device contract, T-Mobile dropped 389,000 contract customers and improvement from the 536,000 dropped in the second quarter.

On the prepaid front, T-Mobile added 312,000 customers in the third quarter.

Add it up and T-Mobile's customer base turns out to be steady, but the carrier is swapping more profitable contract customers for value oriented subscribers. Churn was 3.5 percent in the third quarter up from 3.3 percent in the second quarter and 3.4 percent a year ago.

T-Mobile reported third quarter earnings of $332 million, up 4 percent from a year ago. Revenue for the quarter was $5.2 billion, up from $5.1 billion a year ago.

As for its merger with AT&T, T-Mobile said that parent Deutsche Bank continues to pursue the AT&T deal and will battle the Department of Justice in court in mid-February. Deutsche Telekom expects to close the T-Mobile-AT&T merger in the first half of 2012.

In the meantime, T-Mobile is becoming a value player. The company launched unlimited value plans that seem to have attracted customers. In a statement, Humm said the company is focused "on making smartphones affordable to all Americans through our unlimited Value plans, improvements to our 4G network, and an expanding portfolio of 4G devices." But Humm also said that churn could increase as the iPhone 4S rolls out.


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