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Feb. 27, 2010

Flat-rate wireless operators MetroPCS Communications and Leap Wireless posted very similar increases in subscriber additions for the fourth-quarter.

But overall, both carriers reported increased churn rates as well and they still expect continued pressure in the no-contract market segment in 2010. However, the carriers didn't comment on recent merger speculation.

MetroPCS finished 2009 with 6.6 million net new subscribers, up 1.3 million for the year. Fourth-quarter net additions totaled 317,255, down almost 40 percent from the year-ago quarter, but significantly better than its third-quarter net additions of just over 66,000.

The wireless carrier changed its pricing strategy last month to better address the disappointing third-quarter net adds.

So it was a decent fourth quarter, even as the company said that, going forward, it expects the no-contract market to face even greater competition from mobile virtual network operators and large incumbents. Sprint Nextel in its Q4 results noted that with the success of its Boost and Virgin Mobile no-contract offerings, it plans to launch even more sub-brands to appeal to niche markets.

Because of the weak economy and prospects of increased competition, MetroPCS said it wouldn't provide guidance for 2010, however.

Total income for the quarter stood at $33 million on revenues of $930 million, compared to $15 million a year ago on revenues of $724 million in 2008.

“During 2009, as the effects of a weak economy persisted, we also saw increased competition. We trialed various promotions, launched new services and rate plans as well as introduced new a la carte products. With solid full-year subscriber growth and continued profitability, I am pleased to report both our cash per user and cost per gross addition for 2009 continued to be among the lowest of any facilities-based wireless carrier,” said Roger Linquist, chairman, CEO of MetroPCS.

Linquist said Metro’s decision to include taxes and fees in its Wireless for All plans announced in January are changing the way no-contract carriers will offer services going forward. Sprint Nextel's Boost service also includes all fees and taxes in its $50 per month, unlimited offering.

MetroPCS reported improved ARPU (average revenue per user) from the year-ago period at a time when many carriers are reporting decreases in ARPU as the popularity of unlimited voice minute plans increase. Of its nationwide competitors, only AT&T Mobility saw better ARPU in the fourth quarter.

Linquist said the increased competition in the no-contract market segment expanded the market segment as a whole and increased awareness, but also changed the segment so that plans that include taxes and other fees going forward will become more prevalent.

Linquist said the carrier plans to continue to be the low-cost leader and has the ability to “tinker at the edges” if it needs to respond to increased competition.

MetroPCS said it plans to spend between $600 million and $800 million on capital expenses in 2010, with about half of those funds going towards its LTE buildout and half of the costs going to expansion and increasing capacity.

MetroPCS’ Q4 ARPU reached $40.70, vs. $40.52 in 2008. But churn rates rose to 5.3 percent vs. 5.1 percent in the year-ago quarter.

For its part, no-contract competitor Leap Wireless recorded 298,000 net new customer additions in the last quarter of last year, ending the year with 4.96 million net new subscribers, which amounts to a 29 percent increase year over year.

CEO Doug Hutcheson said the wireless carrier crossed the 5 million customer threshold earlier this year.

Of its Q4 additions,102,000 were voice users in "core markets," 127,000 were voice users in "expansion markets" and 69,000 were broadband customers. Net new additions were down almost 23 percent year to year.

The mobile service carrier posted a net loss of $64 million for 2009, up a little over 17 percent from its year-ago net loss of $54.6 million, although revenues improved almost 16 percent year-over-year to $599.3 million in the period.

Just like MetroPCS, Leap's customer churn rate also increased to 4.7 percent, while ARPU declined nearly almost 9 percent to $38.66.

Leap Wireless posted a larger fourth-quarter net loss yesterday as expenses grew even more than anticipated.

To be sure, Leap posted a net loss of $61.9 million, or 82 cents per share compared with a loss of $55.6 million, or 82 cents per share, in the same 2009 period.

Overall, Leap had more outstanding shares in the latest quarter, which lowers per-share results. Revenue rose 16 percent to $599.3 million from $518.9 million. On average, wireless industry analysts were expecting a loss of 65 cents per share on revenue of $633.7 million.

The quarter's operating costs rose 15 percent to $593 million. Leap added about 298,000 net new mobile customers during the quarter, bringing its total users to almost 5 million at the end of the period.

Revenue rose 22 percent to $2.38 billion. Doug Hutcheson, the company's president and CEO, said Leap expects its churn (customer turnover rate) to remain higher than historical levels over the short term.

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Source: Leap Wireless and MetroPCS.