T-Mobile's bright spot: Machine-to-machine connections

T-Mobile's first quarter churn rate improved sequentially even as postpaid customers fled. Why? M2M connections.
Written by Larry Dignan, Contributor

T-Mobile's first quarter results showed some signs of life, but high margin postpaid customers continued to head for the exits. Fortunately for T-Mobile, there's the rise of wirelessly connected machines.

First, the mixed bag that is T-Mobile's first quarter. The company added 187,000 net customers in the first quarter, but saw 510,000 contract customers leave. That's an improvement on the fourth quarter, but still dismal. T-Mobile is riding prepaid and wholesale accounts.

CNET: T-Mobile customer growth back thanks to prepaid, wholesale

Overall, T-Mobile reported a profit of $200 million on revenue of $5.03 billion, down from $5.16 billion a year ago. In a statement, T-Mobile touted its "challenger strategy" to be a value play built on LTE.

T-Mobile also saw much better churn rates in the first quarter---2.5 percent, a 50 basis point improvement on the fourth quarter. Why? Machines.

The company said:

M2M net customer additions were 262,000 in the first quarter of 2012 compared to net customer losses of 95,000 in the fourth quarter of 2011 and net customer additions of 192,000 in the first quarter of 2011. The sequential change was driven by improved M2M customer churn. In the fourth quarter of 2011, there were significantly higher M2M deactivations including a nearly 265,000 deactivation related to one customer.

The catch: M2M have lower average revenue per user (less than $2).

However, if T-Mobile can connect more verticals like manufacturing and health care perhaps it can hold the fort while it comes up with a comeback strategy to compete with Verizon, AT&T and Sprint.

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