UPDATE 2-T-Mobile US customer growth beats Street but financials weigh
NEW YORK, Aug 8 (Reuters) - T-Mobile US reported subscriber growth that blew past analyst expectations, as it ended a four-year drought with a big marketing push and its launch of the Apple Inc iPhone, sending its shares up 4 percent.
But the customer growth came at a cost and weighed on its financial results. As a result its parent company, Deutsche Telekom AG, which owns 74 percent of T-Mobile US, said on Thursday it would plow more money into the No. 4 U.S. mobile provider to help it to continue growing.
T-Mobile US said it added 688,000 contract customers in the second quarter including wireless broadband customers and phone users, well ahead of the average analyst expectation for subscriber additions of 140,000 taken from four analysts whose estimates ranged from 33,000 to 254,000.
This was ahead of bigger rival AT&T Inc, which added just over 550,000 subscribers in the quarter, and Sprint Corp , which lost 1.045 million contract customers in the quarter as it shut down its Nextel network.
While New Street analyst Jonathan Chaplin was impressed with the company's customer growth he worried whether they would be able to keep up the growth pace.
"The question remains as to whether TMUS can sustain the performance in postpaid as the iPhone buzz fades and competitive intensity rises" Chaplin said in a research note.
Customer growth helped boost the company's revenue but it came with a big cost as T-Mobile needed to spend heavily on marketing to lure new customers in.
The company, which merged with smaller rival MetroPCS in April, said that including MetroPCS, adjusted earnings before interest, tax, depreciation and amortization (EBITDA) dropped 30 percent year-over-year to $1.3 billion.
Chaplin said that the adjusted EBITDA number missed his expectation for $1.33 billion.
T-Mobile U.S., which said it last posted subscriber growth in the first quarter of 2009, set a target for 2013 subscriber net additions of between 1 million and 1.2 million.
But, to Citi analyst Michael Rollins, this already suggested a slowdown in growth from the second quarter.
"We believe second quarter headline results could be as good as it gets for a little while," Rollins said in a research note.
For the full year of 2013, T-Mobile is projecting adjusted EBITDA on a pro forma combined basis, including MetroPCS results, to be in the range of $5.2 billion to $5.4 billion. Cash capital expenditures are expected to be in the range of $4.2 billion to $4.4 billion on a pro forma combined basis.
T-Mobile US service revenue for the second quarter grew by 8.6 percent, helped by the inclusion of MetroPCS results for May and June 2013.
T-Mobile US reported a loss of $54 million for the second quarter compared with a profit of $175 million in the year-ago quarter.
It said that total revenue rose by 27.5 percent to $6.23 billion primarily due to the inclusion of MetroPCS results and record smartphone sales.
Earlier this year, T-Mobile US eliminated phone subsidies and set up phone installment payment plans for its customers with the idea that they could upgrade their phones more often.
Its bigger rivals AT&T Inc and Verizon Wireless have followed suit with announcements of their own version of T-Mobile's offer of more frequent phone upgrades.
Including pre-paid and wholesale customers, T-Mobile recorded total customer net additions of 1.1 million, an improvement of 1.3 million net additions year-over-year.
T-Mobile shares rose to $25 in pre-market trade after closing at $24.01 on Wednesday.