Bloomberg News

T-Mobile USA Boosts Customers as Takeover by AT&T Drags On

November 15, 2011

(Updates with closing share price in Germany in fifth paragraph.)

Nov. 10 (Bloomberg) -- T-Mobile USA, the fourth-largest U.S. wireless company, added customers for the first time in a year and reported profit that beat estimates as its German owner fights to complete the proposed sale of the unit to AT&T Inc.

Third-quarter adjusted earnings before interest, taxes, depreciation and amortization of 1.03 billion euros ($1.4 billion) exceeded analyst estimates by 17 percent. Losses of contract customers slowed as T-Mobile offered tariffs promising $35 monthly savings versus AT&T Inc., Sprint Nextel Corp. and Verizon Wireless plans, and an influx of prepaid customers led to net additions of 126,000 customers during the period.

Deutsche Telekom AG and AT&T are battling a lawsuit against the $39 billion transaction filed by the U.S. Justice Department, which says the takeover would reduce competition. T- Mobile, with a total 33.7 million customers at the end of September, has lagged behind rivals as the only nationwide mobile-phone operator not offering Apple Inc.’s iPhone.

“We’ve gotten better at winning new customers, but the rate at which subscribers are leaving still isn’t satisfactory,” Deutsche Telekom Chief Executive Officer Rene Obermann said on a call today. “It looks as if that’s still going to be the case in the fourth quarter.”

Contract Losses

Deutsche Telekom, based in Bonn, rose 3.7 percent to 9.11 euros at the close of trading in Frankfurt. The stock is down 5.6 percent this year, giving the company a market value of 39.4 billion euros.

AT&T added 0.7 percent to $29.12 at 1:47 p.m. in New York. Sprint Nextel rose 3.7 percent to $2.84. Verizon Communications Inc. climbed 1.3 percent to $37.36.

T-Mobile USA lost 186,000 contract subscribers in the quarter, bringing the losses over the past four quarters to 1.1 million. Still, the reduction was an improvement from the 281,000 contract losses in the second quarter, and compared with a reduction of 253,000 clients predicted by analysts surveyed by Bloomberg.

Deutsche Telekom today confirmed a forecast for 2011 adjusted Ebitda at the U.S. business of about $5.5 billion after reaching 71 percent of the target in the first nine months.

T-Mobile’s capital expenditures rose 15 percent to $741 million in the period as the operator expanded its network that uses the faster HSPA+ technology. Plans to follow Verizon and AT&T in constructing a so-called Long-Term Evolution network have been put on hold pending completion of the merger.

The antitrust review of the takeover may sap T-Mobile’s strength as an independent company, said Roger Entner, an analyst at Recon Analytics in Boston.

“They need to be vigorously competitive on post-paid, especially when profitability in prepaid is very challenging,” Entner said. T-Mobile needs to add three to four prepaid customers for every postpaid customer it loses if it’s to maintain current profitability, Entner said.

--Editors: Kenneth Wong, David Risser

To contact the reporters on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net; Scott Moritz in New York at smoritz6@bloomberg.net

To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Peter Elstrom at pelstrom@bloomberg.net


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