T-Mobile‘s “uncarrier” strategy continues to pay off in terms of subscriber gains, but America’s fourth-largest wireless operator is losing more money as a result.
Bellevue, Washington-based T-Mobile, which did away with two-year contracts for new subscribers a year and a half ago, says it added 1.4 million postpaid customers in the third quarter – a number likely to approach 5 million for 2014 when the company’s next results are announced early next year.
The operator’s losses, however, are increasing. T-Mobile reported a net loss of $94 million last quarter, way up from the $36 million it lost in the third quarter of 2013. On the flip side, revenue was up 10 percent, to $7.35 billion.
Marketing, promotional and equipment costs are clearly weighing on margins, but 451 Research analyst Rich Karpinski says T-Mobile’s strategy “remains hard to criticize.”
“What was the alternative? Sitting at No.4 in the market and slowly but surely falling even further behind?” asked Karpinski, commenting specifically on a Wall Street Journal article. “Beyond that, T-Mobile’s long-term story is being played out deep within its earnings results, given that more profitable postpaid growth almost tripled that of prepaid; ARPU grew 4.2% year over year (a key turnaround); and churn (while still higher than rivals) dropped from 1.7% to 1.6% even as the company eliminated contracts. Those metrics are a recipe for continued success, proving it can attract, keep and monetize core smartphone customers, which along with an improved network will allow it to ease back its acquisition spending over time.”
By comparison, T-Mobile’s subscriber additions were not far behind what Verizon reported for the third quarter. In the first quarter of the year, the “uncarrier” added more subscribers than Verizon and T-Mobile combined, but that has begun to even out.