UPDATE: MetroPCS 1Q Net Rises 11% On Subscriber Growth
May 07 2009 - 8:49AM
Dow Jones News
MetroPCS Communications Inc.'s (PCS) first-quarter net income
rose 11%, fueled by subscriber growth in several key new
markets.
MetroPCS, which offers flat-rate pre-paid pricing with regional
restrictions, sits in the sweet spot in the industry. More
customers are trading down to cheaper plans and avoiding contracts.
But the growth has attracted a lot of players, intensifying the
competition in this segment.
That's reflected in MetroPCS's lower average revenue per user,
suggesting it had to cut prices to stay in contention. Cost cuts,
however, helped it to bank higher profits.
"Profitability impressive given subscriber gains," said Goldman
Sachs analyst Scott Malat.
MetroPCS posted income of $44 million, or 12 cents a share, up
from $39.5 million, or 11 cents a share, a year earlier. There were
5.2% more shares outstanding in the most recent period. The latest
results included about $382,000 in write-downs related to hedging;
the prior year had $13.9 million.
Revenue increased 20% to $795.3 million on a 29% jump in
services revenue and 34% drop in equipment revenue.
Analysts polled by Thomson Reuters expected earnings of 9 cents
a share on revenue of $818 million.
Contributing to results were the launches in New York and Boston
in the period. MetroPCS blanketed the billboards and airwaves with
advertisements ahead of its rollout.
The company said last month subscribership rose 51% from a year
earlier, marking a third-straight quarter of growth and another
record increase. Net subscriber additions rose to 684,000.
It also said in April that churn, or turnover rate, rose one
percentage point to 5%. Average revenue per user fell 5%, the
company said Thursday.
MetroPCS backed its estimate for full-year consolidated adjusted
earnings before interest, taxes, depreciation and amortization of
$900 million to $1.1 billion, as well as subscriber additions of
1.4 million to 1.7 million.
Threatening its forecast are aggressive offers from rival
pre-paid players. Sprint Nextel Corp.'s (S) Boost service offers a
flat-rate, all-inclusive $50 plan, and added 764,000 new customers
in the first quarter.
Virgin Mobile USA Inc. (VM) has also cut its plan to $50 a
month, while Leap Wireless International Inc. (LEAP) competes also
has some overlapping territories. National player T-Mobile USA has
also delved into the pre-paid segment.
MetroPCS' stock rose 0.9% to $18.60 in pre-market action.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020;
roger.cheng@dowjones.com
(Kerry Grace contributed to this report.)