At the end of the quarter, T-Mobile reported it had almost 28 million customers, adding 857,000 net new customers during the quarter. T-Mobile USA also reported ARPU of $53 in the quarter, up from $52 in the third quarter of 2006.
T-Mobile USA also reported:
- $1.41 billion in Operating Income Before Depreciation and Amortization (OIBDA) in the third quarter of 2007, up 15.1% from the third quarter of 2006.
- Contract customer churn 2.0% in the third quarter, down from 2.3% in the third quarter of 2006.
- T-Mobile announced the proposed acquisition of SunCom Wireless in the quarter, expanding coverage to 98 of the top 100 markets in the U.S. (up by 11)
“Right around the beginning of the quarter, we introduced yet another in our series of breakthrough services aimed at bringing T-Mobile to greater numbers of new customers,” said Robert Dotson, Chief Executive Officer and President of T-Mobile USA, Inc. “Our new HotSpot @HomeSM service is changing the game by allowing customers to make unlimited calls from home over Wi-Fi while providing the best in-home wireless coverage possible. 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. We also continue to add greater numbers of new customers onto myFavesSM with more than 3.5 million people on the service and growing.”
“T-Mobile USA continues to build on its role as a key component of Deutsche Telekom’s strategy to grow abroad with mobile,” said René Obermann, Chief Executive Officer, Deutsche Telekom. “In the quarter, we reiterated our confidence in this business by working with the U.S. leadership team to reach an agreement to acquire SunCom Wireless, a compelling acquisition that fits nicely into our current footprint.”
Customers
— In the third quarter of 2007, T-Mobile USA added 857,000 net new customers, the same as in the second quarter of 2007, and up from 802,000 in the third quarter of 2006.
— Contract customer net additions in the third quarter of 2007 made up 65% of customer growth, down from 80% in the second quarter of 2007 and 96% in the third quarter of 2006.
— In July 2007 T-Mobile launched the FlexPaySM product. FlexPay is a program that opens access to T-Mobile’s entire lineup of products and services to a greater number of new customers by letting people pay in advance for their services and handsets. FlexPay contributed a significant number of net customer additions in the quarter. There are two forms of the FlexPay product - one with and one without a contract. FlexPay customers with a contract are included in contract customers, and FlexPay customers without a contract are included in prepaid customers. Both products have ARPUs similar to existing contract customers. The higher prepaid share of net customer additions in the third quarter of 2007 was due in particular to the popularity of the no-contract version of FlexPay.
— myFavesSM continues to be very popular with our customers. At the end of the third quarter there were over 3.5 million myFaves customers, up from 2.5 million at the end of the second quarter.
— Contract customers comprised 84% of T-Mobile USA’s total customer base at September 30, 2007.
Churn
— Contract customer churn was 2.0% in the third quarter of 2007, up from 1.8% in the second quarter of 2007 and down from 2.3% in the third quarter of 2006. The year over year decline in churn is primarily due to the introduction of two-year contracts in the second quarter of 2006.
— Blended churn, including both contract and prepaid customers, was 2.9% in the third quarter of 2007, up from 2.7% in the second quarter of 2007 and down from 3.0% in the third quarter of 2006.
OIBDA and Net Income
— T-Mobile USA reported OIBDA of $1.41 billion in the third quarter of 2007, up from $1.39 billion in the second quarter of 2007 and $1.23 billion in the third quarter of 2006.
— OIBDA margin was 32% in the third quarter of 2007, the same as in the second quarter of 2007 and the third quarter of 2006.
— Net income for the third quarter of 2007 was $526 million, up 50% from $350 million in the second quarter of 2007 and down from $1.79 billion in the third quarter of 2006.
— The decrease in net income compared to the third quarter of 2006 was due to a $1.5 billion non-cash income tax benefit realized in the third quarter of 2006.
Revenue
— Service revenues, consisting of contract, prepaid, and roaming and other service revenues, rose to $4.33 billion in the third quarter of 2007, up from $4.20 billion in the second quarter of 2007 and $3.72 billion in the third quarter of 2006.
— The increase is due primarily to growth in the number of customers and year-on-year higher contract ARPU (“Average Revenue Per User” as defined in note 1 to the Selected Data, below).
— Other revenues were $82 million in the third quarter of 2007, slightly down from $89 million in the second quarter of 2007 and down from $147 million in the third quarter of 2006.
— The major reason for the year on year fall in other revenues was the ongoing migration of AT&T’s customers to its own network following the dissolution of our network sharing venture in early 2005.
— In 2007, Wi-Fi revenues were reclassified to contract revenues and roaming and other service revenues (see note 8 to the Selected Data below for further explanation).
— Total revenues, including service, equipment, and other revenues were $4.89 billion in the third quarter of 2007, up from $4.78 billion in the second quarter of 2007 and $4.37 billion in the third quarter of 2006.
ARPU
— Blended ARPU was $53 in the third quarter of 2007, the same as the second quarter of 2007 and up from $52 in the third quarter of 2006.
— Contract ARPU was $57 in the third quarter of 2007, the same as in the second quarter of 2007 and up from $56 in the third quarter of 2006, driven by increasing data services revenues (see notes 1 and 8 to the Selected Data below).
— Data services revenues were $666 million in the third quarter of 2007, representing 15.4% of blended ARPU, or $8.10 per customer, compared to 14.7% of blended ARPU, or $7.80 per customer in the second quarter of 2007, and 11.3% of blended ARPU, or $5.90 per customer in the third quarter of 2006.
— Strong growth in messaging revenue continued to be the most significant driver increasing data ARPU. The total number of SMS and MMS messages increased to almost 21 billion in the third quarter of 2007, compared to 18 billion in the second quarter of 2007 and 10 billion in the third quarter of 2006. Strong GPRS / EDGE access and usage revenues were another significant driver of the increase in data services revenues compared to the third quarter of 2006.
— In September T-Mobile USA launched the BlackBerry Curve, the first converged device enabled for the new HotSpot @Home service.
CPGA and CCPU
— The average cost of acquiring a customer, Cost Per Gross Add (“CPGA” as defined in note 3 to the Selected Data, below) was $280 in the third quarter of 2007, down from $300 in the second quarter of 2007 and in the third quarter of 2006.
— The lower CPGA compared to the second quarter of 2007 is primarily due to the change in customer mix and lower advertising costs. The change in customer mix was also a significant reason for the decline in CPGA in the third quarter of 2007 versus the third 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 $26 per customer per month in the third quarter of 2007, up from $25 in the second quarter of 2007 and the third quarter of 2006.
— CCPU in the third quarter was essentially in line with the second quarter of 2007, the reported increase is primarily due to rounding. Higher roaming costs were the primary reason for the increase in CCPU in the third quarter of 2007 compared to the third quarter of 2006.
Capital Expenditures
— Cash capital expenditures (see note 6 to the Selected Data below) were $500 million in the third quarter of 2007, compared with $546 million in the second quarter of 2007 and $569 million in the third quarter of 2006.
— The sequential reduction in cash capital expenditures was due to an increase in incurred capital spend being more than offset by cash payment timing differences.
— T-Mobile USA continued its commitment to invest in network coverage and quality in the third quarter of 2007, adding almost 600 new cell sites, bringing the total number of cell sites at the end of the quarter to just over 37,000.
Other Highlights
— T-Mobile USA announced the proposed acquisition of SunCom Wireless (SunCom) in September 2007. The acquisition will further enhance T-Mobile’s network coverage in the southeastern United States and the Caribbean through the complementary addition of SunCom’s markets and customers in North Carolina, South Carolina, Tennessee, Georgia, Puerto Rico and the U.S. Virgin Islands. SunCom operates a GSM/GPRS/EDGE network and has provided roaming service to T-Mobile in these markets since 2004. In October 2007, T-Mobile and SunCom received notification that the proposed acquisition received antitrust clearance from U.S. antitrust regulatory agencies. The transaction remains subject to Federal Communications Commission approval, SunCom shareholder approval, and other customary closing conditions. The closing of the proposed acquisition is expected during the first half of 2008.
— In October 2007, T-Mobile again topped the overall ranking in the J.D. Power and Associates 2007 Customer Satisfaction Index Study, Vol. 2. T-Mobile USA ranked highest in five of the six regions (including four ties).
T-Mobile USA is the U.S. operation of T-Mobile International AG (“T-Mobile International”), the mobile communications subsidiary of Deutsche Telekom AG (“Deutsche Telekom”) (NYSE: DT). In order to provide comparability with the results of other U.S. 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 accordance with International Financial Reporting Standards (IFRS).