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T-Mobile USA reports first quarter results
Posted: 07-May-2009 [Source: T-Mobile USA]

[T-Mobile USA added 415,000 net new customers in the first quarter of 2009, down from 621,000 in the fourth quarter of 2008.]

Bellevue, WA -- T-Mobile USA, Inc. (T-Mobile USA) today reported first quarter 2009 results. In the first quarter of 2009, T-Mobile USA reported OIBDA of $1.38 billion, down 4% compared to the first quarter of 2008, service revenues of $4.8 billion, up 4% compared to the first quarter of 2008, data services revenues up 23% compared to the first quarter of 2008, and 415,000 net new customers added.

"The challenges of the U.S. economic downturn are evident in our first quarter performance," said Robert Dotson, president and CEO, T-Mobile USA. "That said, we remain confident that T-Mobile’s bedrock wireless service remains the core value we offer American consumers backed by the best customer service in the industry. We will continue to bring this value to consumers every day. We remain on track with the aggressive national rollout of our 3G network in 2009. We'll also bring to market highly anticipated new devices and services that put us in a stronger position to capture the enormous opportunity in data services in the U.S. By concentrating and delivering on these growth fundamentals, we are well positioned to compete effectively for the consumers’ hard-earned dollar."

Rene Obermann, CEO of Deutsche Telekom, said, “Despite the intense competitive environment and a struggling economy in the United States, T-Mobile USA is well prepared to take on these challenges. Our approach includes a rapid 3G rollout and an attractive and expanding line-up of 3G-capable devices. We have adopted an action plan addressing these priorities that also includes measures to reduce the cost base.”

Customers

* In the first quarter of 2009, T-Mobile USA added 415,000 net new customers, down from 621,000 in the fourth quarter of 2008 and 981,000 in the first quarter of 2008.

o The number of net new customer additions decreased compared to the first quarter of 2008 primarily due to higher contract churn, as explained below. Gross customer additions increased year-on-year, driven in part by the impact of SunCom and prepaid customer additions. Sequentially, holiday season sales contributed to the number of net new customers being higher in the fourth quarter of 2008 compared to the first quarter of 2009.

o Contract customer net additions made up 39% of customer growth, compared to 43% in the fourth quarter of 2008 and 75% in the first quarter of 2008.

o Prepaid net additions, including FlexPaysm no-contract, were 255,000 in the first quarter of 2009, down from 355,000 in the fourth quarter of 2008 and up from 248,000 in the first quarter of 2008.

* Contract customers comprised 81% of T-Mobile USA’s total customer base at March 31, 2009. T-Mobile USA ended the first quarter of 2009 with 33.2 million customers, up from 32.8 million in the fourth quarter of 2008.

Churn

* Contract churn was 2.3% in the first quarter of 2009, down from 2.4% in the fourth quarter of 2008 and up from 1.7% in the first quarter of 2008.

o Contract churn compared to the first quarter of 2008 continued to be impacted by competitive intensity. Contract churn decreased in the first quarter of 2009 compared to the fourth quarter of 2008, in line with previous years.

* Blended churn, including both contract and prepaid customers, was 3.1% in the first quarter of 2009, down from 3.3% in the fourth quarter of 2008 and up from 2.6% in the first quarter of 2008.

OIBDA and Net Income

* T-Mobile USA reported OIBDA of $1.38 billion in the first quarter of 2009, down from $1.57 billion in the fourth quarter of 2008 and $1.44 billion in the first quarter of 2008.

o The sequential decrease in OIBDA was primarily due to lower service revenues as discussed below. Additionally, a reduction in other revenues (caused by certain wholesale roaming agreements ending) and CPGA (as discussed below) impacted OIBDA in the first quarter of 2009.

o The year-on-year decrease in OIBDA resulted from lower ARPU combined with higher network costs, driven by the 2G and 3G network expansion. Additionally, equipment costs increased year-on-year due to customers purchasing converged devices and higher upgrade volumes.

* OIBDA margin (as defined in Note 6 to the Selected Data, below) was 29% in the first quarter of 2009, down from 32% in the fourth quarter of 2008 and first quarter of 2008.

* Net income for the first quarter of 2009 was $322 million, down from $483 million in the fourth quarter of 2008 and $462 million in the first quarter of 2008.

Revenue

* Service revenues (as defined in Note 1 to the Selected Data, below) were $4.77 billion in the first quarter of 2009, compared to $4.90 billion in the fourth quarter of 2008, and up from $4.57 billion in the first quarter of 2008.

o The sequential decrease in service revenues in the first quarter of 2009 compared to the fourth quarter of 2008 was primarily due to the fall in contract ARPU, as explained below. Additionally, lower roaming revenues contributed to the decrease in service revenues compared to the fourth quarter of 2008.

o The increase in service revenues year-over-year was primarily due to the growth in contract customers and the SunCom Wireless acquisition.

*Total revenues, including service, equipment, and other revenues were $5.40 billion in the first quarter of 2009, down from $5.72 billion in the fourth quarter of 2008 and up from $5.19 billion in the first quarter of 2008. o The increase in total revenues year-over-year was primarily due to the growth in contract customers and the SunCom Wireless acquisition, which contributed $202 million in the first quarter of 2009 compared to $86 million in the first quarter of 2008.

ARPU

* Blended Average Revenue Per User (“ARPU” as defined in Note 1 to the Selected Data, below) was $48 in the first quarter of 2009, compared to $50 in the fourth quarter of 2008 and $51 in the first quarter of 2008.

* Contract ARPU was $52 in the first quarter of 2009, down from $54 in the fourth quarter of 2008 and $55 in the first quarter of 2008.

o The decrease in contract ARPU sequentially and year-over-year was driven by lower variable revenues from contract customers as customers control their discretionary spending, for example by switching plans and incurring less roaming. Also, contract ARPU was impacted by monthly recurring charges per customer decreasing due to a change in the mix of the customer base.

* Prepaid ARPU was $21 in the first quarter of 2009, down from $23 in the fourth quarter of 2008 and $22 in the first quarter of 2008.

o The decrease compared to the first and fourth quarters of 2008 was primarily driven by a change in customer mix moving towards better value offers.

* Data services revenue (as defined in Notes 1 and 9 to the Selected Data, below) was $935 million in the first quarter of 2009, representing 19.6% of blended ARPU, or $9.40 per customer, up from 18.5% of blended ARPU, or $9.30 per customer in the fourth quarter of 2008, and 16.6% of blended ARPU, or $8.50 per customer in the first quarter of 2008. Data services revenue increased 23% in the first quarter of 2009 versus the first quarter of 2008.

o Growth in 3G converged device users was the most significant driver of data ARPU, with 1.5 million 3G-capable converged devices on the T-Mobile USA network at the end of the first quarter of 2009.

o The total number of messages carried on the T-Mobile USA network doubled to 66 billion in the first quarter of 2009, compared to 33 billion in the first quarter of 2008 as messaging revenue continues to be a strong driver of data ARPU, with customers purchasing plans that include messaging.

o As part of the focus to aggressively build out the 3G network and services, T-Mobile USA launched the T-Mobile webConnectTM USB Laptop Stick in March and the new 3G-enabled T-Mobile Sidekick LXTM in April.

CPGA and CCPU

* The average cost of acquiring a customer, Cost Per Gross Add (“CPGA” as defined in Note 4 to the Selected Data, below) was $300 in the first quarter of 2009, up from $270 in the fourth quarter of 2008 and the same as the first quarter of 2008.

o CPGA increased in the first quarter of 2009 compared to the fourth quarter of 2008. This was primarily due to lower equipment subsidy loss (per gross customer addition) driven by handset promotions in the fourth quarter of 2008.

* The average cash cost of serving customers, Cash Cost Per User (“CCPU” as defined in Note 3 to the Selected Data, below), was $25 per customer per month in the first quarter of 2009, consistent with the fourth quarter of 2008 and first quarter of 2008.

Capital Expenditures

* Cash capital expenditures (see Note 7 to the Selected Data below) were $1.13 billion in the first quarter of 2009, compared with $895 million in the fourth quarter of 2008 and $690 million in the first quarter of 2008.

o T-Mobile USA’s continued focus on network quality and coverage as well as the national roll-out of the UMTS/HSDPA network caused 2G and 3G incurred capital expenditures to remain strong both year-on-year and sequentially. The increase in cash capital expenditures in the first quarter of 2009 is due primarily to payment timing differences compared to the fourth quarter of 2008 and the first quarter of 2008.

o T-Mobile USA’s 3G network now reaches 107 million people.

Stick Together Highlights

* In April 2009, T-Mobile USA launched the newest T-Mobile Sidekick LX, featuring 3G for faster data speeds and enhanced mobile access to popular social media sites. The new 3G-enabled Sidekick LX also provides improved video capabilities as well as GPS-enabled Live Search.

* In March 2009, T-Mobile USA launched the T-Mobile webConnect USB Laptop Stick, providing customers with seamless connectivity to the Internet on the go. The new webConnect laptop stick allows customers with a laptop to take advantage of faster broadband speeds available through T-Mobile USA’s 3G high-speed data network and accessible Wi-Fi network.

* On February 4, 2009, T-Mobile USA was ranked highest in wireless customer care performance by J.D. Power and Associates. Winning this award in 7 of the last 8 reporting periods continues to demonstrate T-Mobile USA’s strong and successful focus on customer service.

T-Mobile USA is the U.S. operation of Deutsche Telekom AG’s (NYSE: DT - News) Mobile Communications Business, and is a wholly owned subsidiary of T-Mobile International. In order to provide comparability with the results of other US wireless carriers, all financial amounts are in U.S. dollars and are based on accounting principles generally accepted in the United States (“GAAP”). T-Mobile USA results are included in the consolidated results of Deutsche Telekom, but differ from the information contained herein as Deutsche Telekom reports financial results in Euros and in accordance with International Financial Reporting Standards (IFRS).

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