Optical/IP Networks

T-Mobile Gets Tax Bump

T-Mobile US Inc. -- the American mobile arm of Deutsche Telekom AG (NYSE: DT) -- reported a big jump in its profits for the third quarter of 2006. The fourth largest cellphone operator in the U.S. reported third quarter net income of $1.79 billion compared to $458 million in the third quarter of 2005. The Bellevue, Wash.-based service provider says that the income growth was due to an increase in overall revenues and the realization of a $1.5 billion non-cash income-tax benefit.

Quarterly revenues were up 15 percent from $3.80 billion in the previous-year quarter and $4.21 billion in the second quarter of 2006. The firm's service revenue increases came from subscriber additions and -- in common with other U.S. operators -- buoyant data revenues of $421 million.

"T-Mobile USA customers are far and away the most messaging-centric customers in the wireless industry," points out analyst John Byrne from Technology Business Research Inc. (TBR) . "Total SMS and MMS volume increased by 25 percent sequentially to nearly 10 billion, nearly matching Cingular’s total message volume despite having a customer base about 40 percent as large as Cingular’s."

The firm added 802,000 new subscribers for the quarter, up compared to 613,000 users added in the second quarter of 2006, but down year-on-year from just over 1 million users in the third quarter of 2005.

TBR's Byrne reckons the introduction of the Sidekick 3 and BlackBerry Pearl helped attract new "converged device" users for the operator. "The company added 172,000 new Sidekick or BlackBerry customers in [the third quarter], a significant sequential improvement, to end the quarter with 1.4 million converged device customers," he notes. "The introduction of the BlackBerry Pearl in September also provided a boost to... results and is likely to help the company maintain strong converged device customer growth in Q4."

Average revenue per user (ARPU) for the quarter was basically flat at $52 -- down from $53 a year ago -- but the same as the second quarter of 2006. T-Mobile says that the numbers were skewed by the higher proportion of pay-as-you-go customers in the customer base in 2006.

"T-Mobile USA’s prepaid business continues to struggle with increasing churn and falling ARPU, reflecting intense competition in the prepaid segment," Byrne says.

Still, taken overall, the quarter was a strong one for T-Mobile as well as major rivals Cingular Wireless and Verizon Wireless . Of the four major U.S. operators, only Sprint Wireless (NYSE: PCS) had a disappointing quarter.

After falling behind its larger rivals in 3G offerings, T-Mobile spent around $4.2 billion at the recent spectrum auctions in a bid to catch up. Recently, there has been talk of a merger between Sprint and T-Mobile in order to compete on a more level playing field with their two larger rivals. It looks unlikely, however, that Deutsche Telekom would want to give up its U.S. cash cow and the challenges of combining the two networks would be great. (See Three-Network Pileup.)

— Dan Jones, Site Editor, Unstrung

Be the first to post a comment regarding this story.
Sign In