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T-Mobile USA Adds Nearly 1M Subs

Fourth-ranked mobile operator T-Mobile US Inc. is almost keeping pace with AT&T Inc. (NYSE: T) and Verizon Wireless and beating out Sprint Corp. (NYSE: S) in the race to add new subscribers in the strongly competitive U.S. cellular market.

For the quarter ended March 31, T-Mobile USA reported net income up 30.7 percent at $315 million, compared to $241 million in the same quarter last year. The company's revenue grew over 12 percent year-on-year to $4.5 billion.

The company added 980,000 new customers in the first quarter of 2007, slightly down from the same period last year but up from the up from 901,000 in the last three months of 2006. The American arm of T-Mobile International AG says that 74 percent of those additions are customers that pay their bill monthly, who are regarded as more valuable than fly-by-night, pay-as-you-go users.

In comparison, the top two carriers -- AT&T (née Cingular) and Verizon -- both added over a million subscribers this quarter. T-Mobile, however, is growing faster than Sprint Nextel, its closest rival in the market. Sprint added nearly 600,000 net wireless subscribers in the same period, but many of these signed up for its cheaper Boost pay-as-you-go service or wholesale channels. (See Sprint's Cold Call Quarter.)

The distinction between monthly paying customers and those that top-up their accounts is an important one in the increasingly saturated U.S. market. Operators generally derive more average monthly revenue per user (ARPU) from the monthly accounts. T-Mobile says that overall ARPU was $52 in the first quarter of 2007 up from $51 in the same quarter in 2006. Postpay ARPU was $56 in the first quarter of 2007 up from $54 in the same period last year.

In common with its rivals, T-Mobile also saw another significant hike in data usage, particularly text and multimedia messaging. Data revenues hit $570 million in the first quarter of 2007, representing 14.3 percent of ARPU, or $7.50 per customer, compared to 12.5 percent, or $6.50 in the fourth quarter of 2006.

T-Mobile USA's relative success, however, was somewhat overshadowed by fixed-line losses at its German parent company, Deutsche Telekom AG (NYSE: DT). The parent reported that 588,000 wireline customers had defected in the midst of fierce price cutting amongst domestic operators in the three months through March.

Deutsche Telekom posted income of 459 million Euros ($621.3 million) for the quarter, compared with 1.09 billion Euros a year earlier. Analysts had been expecting income around the 773 to 774 million Euros mark ($1.05 billion). Overall revenue, however, was bolstered by the company's stronger mobile performance, up 4.1 percent to 15.45 billion Euros ($20.91 billion) for the quarter.

In afternoon trading on the NYSE, Deutsche Telekom's stock was down 17 cents, or 1.05 percent, to $17.01, on the news of its wireline woes.

— Dan Jones, Site Editor, Unstrung

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