T-Mobile loses 50,000 customers in Q2 2011, revenue dips slightly

Adjusted OIBDA of $1.3 billion within the second quarter of 2011, up from $1.2 billion inside the first quarter of 2011 but down from $1.4 billion within the second quarter of 2010

Service revenues inside the second quarter of 2011 of $4.6 billion, in line with the 1st quarter of 2011, but down 1.7% from $4.7 billion within the second quarter of 2010

Contract ARPU of $53 inside the second quarter of 2011, up from $52 within the first quarter of 2011 and every of the former four quarters

Data ARPU of $13.60 within the second quarter of 2011, up $2.00 or 17.2% from the second one quarter of 2010

Net customer losses of fifty,000, an improvement from 99,000 net customer losses inside the first quarter of 2011 and 93,000 net customer losses inside the second quarter of 2010

Nearly 10 million customers using 3G/4G smartphones as of the second one quarter of 2011, a rise of fifty% from the second one quarter of 2010

America’s Largest 4G Network™ currently covers over 200 million people in over 190 markets and is being upgraded to even faster speeds (HSPA+ 42), which now covers greater than 170 million people in over 100 markets

BELLEVUE, Wash.–(BUSINESS WIRE)–T-Mobile USA, Inc. (“T-Mobile USA”) today reported second quarter 2011 results. For the second one quarter of 2011, T-Mobile USA reported service revenues of $4.6 billion, in line with service revenues inside the first quarter of 2011, and altered OIBDA of $1.3 billion, up from $1.2 billion reported within the first quarter of 2011. The collection of Americans covered by our 4G network and the choice of our customers using 3G/4G smartphones both continued to extend significantly in the course of the quarter, driving growth in data ARPU. Additionally, net customer losses were 50,000 within the second quarter of 2011, nearly a 50% improvement from the 99,000 net customer losses within the first quarter of 2011.

“In a challenging market, we’re seeing some encouraging trends within the quarter, particularly with our prepaid product growth and our year-on-year contract ARPU increase, due to all-time high of 29% of our customer base using 3G/4G smartphones. While contract churn is still high, we’re eager about upgrading our customers to better quality products and targeting retaining our loyal customers,” said Philipp Humm, President and CEO of T-Mobile USA. “We also continue to spotlight customer value through further network upgrades where we now reach greater than 170 million Americans with even faster speeds, through our large 4G Android device portfolio, and by offering affordable unlimited rate plans.”

“The us remains a tricky marketplace for Deutsche Telekom, but we see improvements in comparison to the primary quarter of 2011. T-Mobile USA will continue its strategy with the extended HSPA+ 42 coverage and continued data growth,” said René Obermann, CEO of Deutsche Telekom.

Customers

T-Mobile USA served 33.6 million customers (as defined in Note 1 to the chosen Data, below) on the end of the second one quarter of 2011, generally in keeping with the primary quarter of 2011 and the second one quarter of 2010.

Within the second quarter of 2011, net customer losses were 50,000, in comparison with net losses of 99,000 within the first quarter of 2011 and 93,000 within the second quarter of 2010.

Within the second quarter of 2011, partner branded customers, representing our Wal-Mart Family Mobile business, were reclassified to the contract category from prepaid because the hybrid product, introduced inside the third quarter of 2010, has demonstrated product characteristics more closely related to T-Mobile USA’s other contract products. Prior quarter amounts were restated to comply to current period customer reporting classifications.

Contract net customer losses were 281,000 inside the second quarter of 2011, an improvement of 26% from the 382,000 net contract customer losses within the first quarter of 2011, but a decline from the 106,000 net contract customer additions within the second quarter of 2010.

Sequentially, the development in net contract customer losses was driven primarily by the introduction of recent unlimited rate plans within the second quarter and faster growth in our connected device business.

The decline in contract customers within the second quarter 2011 in comparison to the second one quarter of 2010 was thanks to intense competitive pressures within the US wireless marketplace and the implementation of strengthened credit standards as portion of T-Mobile USA’s center around improving customer quality.

Additionally, connected device net customer additions, included within contract customers (as defined in Note 1 to the chosen Data, below), were 256,000 within the second quarter of 2011, an improvement of 33% in comparison with 192,000 within the first quarter of 2011 and 27% when compared with 202,000 inside the second quarter of 2010. Connected device customers totaled 2.3 million at June 30, 2011.

Prepaid net customer additions, including MVNO customers (as defined in Note 1 to the chosen Data, below), were 231,000 within the second quarter of 2011, down 18% in comparison to 283,000 within the first quarter of 2011 and up substantially from the 199,000 net losses inside the second quarter of 2010.

The sequential decline in prepaid net customer additions was due primarily to fewer FlexPay non-contract gross customer additions which have been offset partially by customer growth in traditional prepaid plans.

Year-on-year, prepaid net customer additions increased primarily as a result of the growth in customers including MVNOs, purchasing prepaid monthly unlimited plans.

MVNO customers continued to grow within the second quarter of 2011, totaling 3.5 million as of June 30, 2011.

Churn

Blended churn (as defined in Note 3 to the chosen Data, below), reflecting both contract and prepaid customers, decreased to a few.3% within the second quarter of 2011 from 3.4% in both the 1st quarter of 2011 and the second one quarter of 2010.

The sequential and year-on-year decrease in blended churn was primarily driven by lower churn from T-Mobile USA branded customers (excluding MVNO and connected devices).

Contract churn was 2.4% within the second quarter of 2011, per the primary quarter of 2011 but up from 2.2% within the second quarter of 2010.

The year-on-year increase in contract churn was primarily driven by competitive pressures within the US wireless industry that have continued to negatively impact T-Mobile USA’s contract customer base.

Prepaid churn decreased inside the second quarter of 2011 to six.6%, from 6.7% within the first quarter of 2011 and seven.6% within the second quarter of 2010.

The sequential decrease in prepaid churn was driven by a shift within the customer base towards traditional prepaid products, which was partially offset by higher MVNO churn.

Year-on-year, prepaid churn decreased owing to lower traditional prepaid product churn due to the success of T-Mobile USA’s recently introduced prepaid monthly unlimited plans.

Adjusted OIBDA and Net Income

T-Mobile USA reported adjusted OIBDA (as defined in Note 8 to the chosen Data, below) of $1.3 billion inside the second quarter of 2011, in comparison to $1.2 billion within the first quarter of 2011 and $1.4 billion within the second quarter of 2010.

OIBDA was adjusted within the second quarter of 2011, to exclude AT&T transaction-related costs of $13 million, primarily including employee-related expenses.

Sequentially, adjusted OIBDA increased as a result of lower handset subsidies and upgrade expenses within the second quarter of 2011 in comparison to the primary quarter of 2011, which included more costly customer loyalty initiatives.

Year-on-year, second quarter adjusted OIBDA decreased because of lower service revenue as described above. Additionally, higher network expenses regarding the ongoing investment in T-Mobile USA’s 4G network were offset partly by lower volume-driven commission expenses and lower expenses as a consequence of T-Mobile USA’s Reinvent cost saving initiative program.

Adjusted OIBDA margin (as defined in Note 9 to the chosen Data, below) was 28% within the second quarter of 2011, up from 26% within the first quarter of 2011 but down from 30% within the second quarter of 2010.

Net income within the second quarter of 2011 was $212 million, up 57% when put next to $135 million within the first quarter of 2011 and down 48% from the $404 million reported within the second quarter of 2010.

Sequentially and year-on-year, the changes in net income were driven by a similar factors impacting adjusted OIBDA, as described above. Additionally, certain fair value adjustments relating to our financial instruments impacted Other expense, net, contributing to the changes in net income.

Revenue

Service revenues (as defined in Note 4 to the chosen Data, below) were $4.6 billion within the second quarter of 2011, in line with $4.6 billion within the first quarter of 2011 and down 1.7% from $4.7 billion within the second quarter of 2010.

Service revenues inside the second quarter of 2011 were positively impacted by data revenue growth, driven by increased adoption of mobile broadband data and unlimited text plans by our customers, seasonally higher roaming revenue and better prepaid revenues from the expansion in monthly unlimited plan adoption. These revenue growth drivers were greater than offset by voice revenue declines concerning net losses of branded customers, when compared with the 1st quarter of 2011.

Year-on-year, quarterly service revenues decreased primarily because of contract customer losses, that have been partially offset by the increased adoption of knowledge plans in our contract and prepaid customer base and from T-Mobile USA directly providing handset insurance services to its customers.

Total revenues, including service, equipment, and other revenues were $5.1 billion within the second quarter of 2011, down from $5.2 billion inside the first quarter of 2011 and $5.4 billion within the second quarter of 2010.

Equipment revenues decreased sequentially and year-on-year due primarily to lower handset sales volumes.

ARPU

Blended Average Revenue Per User (“ARPU” as defined in Note 4 to the chosen Data, below) was $46 within the second quarter of 2011, in keeping with the 1st quarter of 2011, but less than $47 within the second quarter of 2010 driven by a shift within the customer base towards prepaid plans.

Contract ARPU was $53 within the second quarter of 2011, up from $52 within the first quarter of 2011 and every of the former four quarters.

Sequentially and year-on-year, contract ARPU increased as data revenue growth greater than offset lower voice revenue. Moreover, the year-on-year increase benefitted from handset insurance contract revenues as a result of launch of the directly-provided T-Mobile Personal Handset Protection insurance and warranty program within the fourth quarter of 2010.

Prepaid ARPU was $18 within the second quarter of 2011, in line with both the 1st quarter of 2011 and second quarter of 2010.

Data service revenues (as defined in Note 4 to the chosen Data, below) were $1.4 billion within the second quarter of 2011, up 17% from the second one quarter of 2010. Data service revenues within the second quarter of 2011 represented 30% of blended ARPU, or $13.60 per customer, up from 29% of blended ARPU, or $13.10 per customer within the first quarter of 2011, and 25% of blended ARPU, or $11.60 per customer inside the second quarter of 2010.

Within the second quarter of 2011, the rise inside the variety of customers using smartphones and the continuing upgrade of the 3G and 4G networks drove Internet access revenue growth throughout the increasing adoption of mobile broadband data plans.

9.8 million customers were using smartphones enabled for the T-Mobile USA 3G/4G network (as defined in Note 12 to the chosen Data, below) comparable to the T-Mobile® myTouch® 4G, T-Mobile® G2x® with Google™, and the Samsung Galaxy S™ 4G on the end of the second one quarter of 2011. This represents a net increase of fifty% or nearly 3.3 million customers using smartphones from the second one quarter of 2010.

3G/4G smartphone customers now account for 29% of total customers, up from 27% within the first quarter of 2011 and 19% within the second quarter of 2010.

Messaging revenue (as defined in Note 5 to the chosen Data, below) also increased sequentially within the second quarter of 2011 with customers moving towards unlimited plans including messaging. Messaging accounted for roughly 35% of total data revenues, in comparison to 37% within the second quarter of 2010.

CPGA and CCPU

The common cost of acquiring a customer, Cost Per Gross Add (“CPGA” as defined in Note 7 to the chosen Data, below) was $320 within the second quarter of 2011, up from $300 within the first quarter of 2011, but down from $330 within the second quarter of 2010.

Sequentially, CPGA increased within the second quarter of 2011 primarily thanks to higher handset subsidies as T-Mobile USA offered a whole lot of incentives to draw customers.

In comparison to the second one quarter of 2010, CPGA decreased primarily because of lower commission expenses and a shift inside the mixture of customer additions towards MVNO and connected device customers.

The common cash cost of serving customers, Cash Cost Per User (“CCPU” as defined in Note 6 to the chosen Data, below), was $23 per customer per thirty days within the second quarter of 2011, down from $25 within the first quarter of 2011 and in line with the second one quarter of 2010.

CCPU decreased within the second quarter of 2011 in comparison with the primary quarter of 2011 caused by lower equipment subsidies from customer loyalty initiatives than were offered within the first quarter of 2011.

Capital Expenditures

Cash capital expenditures (as defined in Note 10 to the chosen Data, below) were $688 million within the second quarter of 2011, in comparison with $749 million within the first quarter of 2011 and $682 million within the second quarter of 2010.

Sequentially, the decrease in cash capital expenditures was due to the payment timing differences that have been partially offset by a rise in incurred capital expenditures in the course of the quarter. Inside the second quarter of 2011, incurred capital expenditures were the results of the ongoing build-out of the HSPA+ 21 and HSPA+ 42 networks (as defined in Note 11 to the chosen Data, below).

In comparison to the second one quarter of 2010, cash capital expenditures were consistent and continued to be incurred to permit for network coverage expansion and the upgrade to HSPA+ 42.

T-Mobile USA currently offers its customers America’s Largest 4G Network with HSPA+ 21 service available in over 190 markets reaching over 200 million people.

To further improve the worth provided to customers through its 4G mobile broadband network, T-Mobile USA has continued to speculate in its HSPA+ 42 network, which reached over 170 million people as of the top of the second one quarter of 2011, doubling the theoretical speed of its 4G network to 42 Mbps.

T-Mobile USA Recent Highlights

On March 20, 2011, Deutsche Telekom AG and AT&T Inc. entered right into a definitive agreement under which AT&T will acquire T-Mobile USA from Deutsche Telekom in a cash and stock transaction worth approximately $39 billion, subject to adjustment based on the agreement. The agreement have been approved by the Board of Directors of both companies, and is anticipated to give an optimal combination of network assets so as to add capacity and supply a chance to enhance network quality within the near term for the shoppers of both companies. Especially, the transaction is necessary to handle spectrum constraints and provides T-Mobile USA customers a transparent route to benefit from new generation LTE (Long run Evolution) services. The transaction is anticipated to shut within the first 1/2 2012, subject to regulatory approvals and other closing conditions. As portion of the transaction, Deutsche Telekom will receive an equity stake in AT&T that, according to the terms of the agreement, would give Deutsche Telekom an ownership interest in AT&T of roughly 8 percent and one seat at the AT&T Board of Directors.

Throughout the second quarter of 2011, and again in July 2011, T-Mobile USA introduced a sequence of latest “Value” rate plans that offer exceptional value and selection to the wireless consumer, reinforcing a spotlight on making it more cost-effective for patrons to experience America’s Largest 4G Network. These plans include offerings of unlimited talk, text and knowledge services to individuals and families (both with and without handset subsidies).

T-Mobile USA continues to unveil leading devices including the HTC Sensation™ 4G and the myTouch® 4G Slide to leverage America’s Largest 4G Network.

In August 2011, T-Mobile USA announced a brand new partnership with 7-Eleven Stores, Inc. to supply a prepaid no contract handset and repair during the retail chain’s 7-Eleven® stores.

T-Mobile USA is the U.S. wireless operation of Deutsche Telekom AG (OTCQX: DTEGY). So that it will provide comparability with the result of other US wireless carriers, all financial amounts are in US dollars and are in accordance with accounting principles generally accepted within the Usa (“GAAP”). T-Mobile USA results are included within the consolidated result of Deutsche Telekom, but differ from the data contained herein as Deutsche Telekom reports financial ends in Euros and based on International Financial Reporting Standards (IFRS).

This press release includes non-GAAP financial measures. The non-GAAP financial measures will be considered along with, but not instead for, the info provided according to GAAP. Reconciliations from the non-GAAP financial measures to the foremost directly comparable GAAP financial measures are provided below following Selected Data and the financial statements.