T-Mobile's big gains in the marketplace aren't coming cheap.
The fourth-largest U.S. wireless carrier capped 2013 with a big
increase in subscribers and projected more gains this year, but the
cost of winning that business hurt its margins and widened its loss
in last year's final quarter.
The results show how T-Mobile US Inc. has managed to shake up
the wireless market by doing away with carrier contracts and
splurging on marketing. But they also raise questions about how
long the company can keep up the costly pace.
T-Mobile shares fell 5.7% Tuesday, after the company posted a
quarterly loss of $20 million, compared with a year-earlier loss of
$8 million. Revenue rose 39% to $6.8 billion, reflecting the merger
with smaller rival MetroPCS Communications Inc.
The carrier, which had long leaked customers to bigger rivals
Verizon Wireless, AT&T Inc. and Sprint Corp., added 869,000 of
the industry's most valuable "postpaid" customers in the fourth
quarter, bringing total additions for the year to two million.
T-Mobile said in 2014 it would add two million to three million
more postpaid customers, those better-off subscribers who pay at
the end of the month and tend to switch carriers much less
frequently than customers who pay as they go.
As of the end of the fourth quarter, the company had 46.7
million customers.
The cost of acquiring new customers jumped 40%. T-Mobile's gains
have eaten into competitors' subscriber additions and have sparked
concerns that a price war may break out in an industry that has
been logging steady gains in the amount of revenue paid by
subscribers.
The carrier's executives, however, signaled strongly that they
don't intend to start one, particularly given the heavy cost of
rolling out new, faster network technology called LTE.
"I don't think it's an environment that would result in an
all-out price war," T-Mobile finance chief Braxton Carter said in
an interview. "There wouldn't be adequate capital to support the
buildout."
T-Mobile has done away with industry features like contracts and
international data fees that have long annoyed customers, but it
hasn't actually lowered prices much, Mr. Carter said.
Its average service revenue per customer has fallen, but that is
largely because the figure no longer reflects device subsidies,
which were replaced by smartphone payment plans that are accounted
for in equipment revenue. "There really hasn't been a step function
down in pricing," he said. "What's really happening is that total
consideration--total payments received from the customer--actually
was up."
AT&T, Verizon Communications Inc.'s Verizon Wireless and
Sprint have followed T-Mobile's moves by cutting prices selectively
on some group plans and data buckets, but haven't implemented
across-the-board cuts.
Antitrust authorities are pleased with the effect T-Mobile is
having in the market following the 2011 rejection of AT&T's $39
billion deal to buy the company. Sprint is now weighing whether to
make a bid of its own, a deal regulators have said they would view
with skepticism, according to people familiar with the matter.
T-Mobile's executives declined to talk about possible mergers
Tuesday.
The company merged into MetroPCS in May, gaining a public stock
listing. It was previously operated by Deutsche Telekom AG, which
still holds about two-thirds of the company's stock.
Write to Everdeen Mason at everdeen.mason@wsj.com and Andrew
Dowell at andrew.dowell@wsj.com
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