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T-Mobile USA Exceeds 25 Million Customer Milestone
Posted: 01-Mar-2007 [Source: T-Mobile]

["At more than 25 million customers and growing, the U.S. business continues to assert its position as the leading growth driver for Deutsche Telekom." - Rene Obermann, Chief Executive Officer, Deutsche Telekom ]

Bellevue, WA -- In the fourth quarter of 2006 T-Mobile USA, Inc (T-Mobile USA) added 901,000 net new customers, up from 802,000 net new customers added in the third quarter of 2006 and down from 1.39 million in the fourth quarter of 2005. Postpay customer net additions made up 87% of fourth quarter customer growth, up from 66% in the fourth quarter of 2005. Postpay customers comprised 85% of T-Mobile USA's total customer base at December 31, 2006. The introduction of two-year contracts earlier in 2006 continued to prove popular with customers, with over three quarters of new postpay customers opting for two-year contract terms in the fourth quarter.

Postpay churn declined to 2.1% in the fourth quarter of 2006 from 2.3% in the third quarter of 2006 and the fourth quarter of 2005. Blended churn, including both postpay and prepaid customers, was 2.9% in the fourth quarter of 2006, level with the fourth quarter of 2005, and slightly down from 3.0% in the third quarter of 2006.

"myFavessm is attracting a new class of customers to our company. These customers see T-Mobile as truly standing apart by offering unique and simple ways for people to effortlessly communicate," said Robert Dotson, Chief Executive Officer and President of T-Mobile USA, Inc. "With offerings like myFaves, we continue to add high quality customers to our ranks. In the fourth quarter, we added more than 900,000 new customers -- of which 783,000 were postpay customers -- helping us surpass the 25 million customer mark. Recently, we also captured our fifth consecutive J.D. Power and Associates award for customer care performance. This type of honor underscores how service at T-Mobile is foundational to the kinds of breakthrough communications capabilities we make possible for our customers."

"T-Mobile USA is playing an increasingly vital role in bringing a service leadership culture to all of DT," said Rene Obermann, Chief Executive Officer, Deutsche Telekom. "At more than 25 million customers and growing, the U.S. business continues to assert its position as the leading growth driver for Deutsche Telekom."

T-Mobile USA reported OIBDA of $1.17 billion in the fourth quarter of 2006, slightly down from $1.23 billion in the third quarter of 2006 and up from $1.11 billion in the fourth quarter of 2005. The sequential fall in OIBDA occurred due to higher total customer acquisition costs related to the strong postpay customer growth and the expected continued decrease in Cingular Wireless LLC ("Cingular") wholesale revenues. 2006 OIBDA was $4.71 billion -- an increase of 12.6% over 2005.

T-Mobile USA's net income for the fourth quarter of 2006 was $179 million, down from $1.79 billion in the third quarter of 2006 and $2.99 billion in the fourth quarter of 2005. The lower net income compared to the third quarter of 2006 and the fourth quarter of 2005 is primarily due to the recognition of non-cash income tax benefits in both of these prior quarters.

T-Mobile USA service revenues, consisting of postpay, prepaid, roaming and other service revenues rose to $3.81 billion in the fourth quarter of 2006, up from $3.72 billion in the third quarter of 2006 and $3.26 billion in the fourth quarter of 2005. The increases are primarily due to growth in the number of customers, supported by strong postpay ARPU ("Average Revenue Per User" as defined in note 1 to the Selected Data, below). Other revenues were $122 million in the fourth quarter of 2006, down from $147 million in the third quarter of 2006 and $213 million in the fourth quarter of 2005. The main reason for the sequential and year on year decrease in other revenues is the ongoing migration of Cingular's customers to its own network following the dissolution of our network sharing venture in early 2005. Total revenues, including service, equipment, and other revenues were $4.52 billion in the fourth quarter of 2006, up from $4.37 billion in the third quarter of 2006 and $3.95 billion in the fourth quarter of 2005.

Blended ARPU was $52 in the fourth quarter of 2006, the same as the third quarter of 2006 and the fourth quarter of 2005. Postpay ARPU was $56 in the fourth quarter of 2006, the same as in the third quarter of 2006 and up from $54 in the fourth quarter of 2005. The year on year increase in postpay ARPU primarily relates to continued data revenue growth.

Data services revenue (see note 1 below) continued to grow, reaching a total of $475 million in the fourth quarter of 2006. Data services revenue was 12.5% of blended ARPU, or approximately $6.50 per customer, in the fourth quarter of 2006, compared to 11.3%, or approximately $5.90, in the third quarter of 2006 and 9.1%, or almost $4.80, in the fourth quarter of 2005. 2006 saw a significant expansion of T-Mobile USA's data device offering with the successful launch of T-Mobile MDA and SDA in February, the Sidekick 3 in July, BlackBerry Pearl in September, and T-Mobile Dash in October. The number of postpay converged device users (which is defined as including BlackBerry and Sidekick device users only) increased to almost 1.6 million by the end of the year, a net increase of over 200,000 users in the quarter. Strong growth in messaging continued to contribute to the increase in data ARPU. The total number of SMS and MMS messages increased to almost 13 billion in the fourth quarter of 2006, compared to 9.9 billion in the third quarter of 2006 and 5.4 billion in the fourth quarter of 2005.

The average cost of acquiring a customer, Cost Per Gross Add ("CPGA", as defined in note 3 to the Selected Data, below) was $300 in the fourth quarter of 2006, level with $299 in the third quarter of 2006 and up from $264 in the fourth quarter of 2005. The higher CPGA compared to the fourth quarter of 2005 is primarily due to higher marketing costs, due in part to the launch of myFavessm in the fourth quarter of 2006.

The average cash cost of serving customers, Cash Cost Per User ("CCPU", as defined in note 2 to the Selected Data, below), was $25.14 per customer per month in the fourth quarter of 2006, slightly higher than $24.83 in the third quarter of 2006 and $24.32 in the fourth quarter of 2005. The sequential increase in CCPU in the fourth quarter was primarily due to higher customer retention costs.

Ongoing operational capital expenditures (purchases of property and equipment) were $675 million in the fourth quarter of 2006, compared with $569 million in the third quarter of 2006 and $807 million in the fourth quarter of 2005. Operational capital expenditures increased to $2.6 billion in 2006 from $2.3 billion in 2005. As part of its ongoing commitment to network coverage and quality, T-Mobile USA added approximately 800 new cell sites in the fourth quarter of 2006, and 3,200 for 2006 as a whole, bringing the total number of cell sites to more than 36,000. In addition, T-Mobile USA has started rolling out its UMTS network and has already deployed 3G equipment on over 1,200 cell sites in the New York metropolitan area.

During the fourth quarter, T-Mobile USA was granted the AWS spectrum for which it was the high bidder in the Federal Communications Commission's (FCC) Auction 66, more than doubling its average spectrum position in the top 100 markets. The total cost of these licenses of $4.18 billion was paid during the third and fourth quarters of 2006. Of the total $4.18 billion, $837 million was paid to the FCC directly by T-Mobile USA and $3.35 billion was paid on T-Mobile USA's behalf by Deutsche Telekom.

In 2006 T-Mobile USA continued its trend in taking highest honors in a number of key industry surveys. For the fourth consecutive reporting period T-Mobile USA was the only wireless carrier to rank highest in overall customer satisfaction among wireless telephone users in all of the six regions surveyed by J.D. Power and Associates, and T-Mobile also received the highest ranking in the J.D. Power and Associates Wireless Retail Sales Satisfaction Performance Study, again for the fourth consecutive reporting period. This successful run of awards continued into 2007, with J.D. Power and Associates announcing that T-Mobile ranked highest in Wireless Customer Care for the fifth reporting period in a row. Also in early January, T-Mobile led the VocaLabs Satisfaction Study among the four largest national wireless phone companies.

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