Monday, August 1, 2011

MetroPCS Plunges 35% Following Q2 Earnings

Shares in MetroPCS fell 36% on Tuesday following the release of its Q2 financial report in which the company disclosed weaker than expected subscriber growth, higher CAPEX and the possibility of purchasing additional spectrum for its LTE network.

Consolidated service revenues were $1.1 billion for the second quarter of 2011, an increase of $191 million, or 21%, when compared to the prior year's second quarter. Income from operations increased approximately $12 million, or approximately 6%, for the second quarter of 2011 when compared to the prior year's second quarter.
Net income for the quarter was $84 million and includes approximately $6 million in charges related to the extinguishment of the Tranche B-1 Term Loans under the company's Senior Secured Credit Facility during the quarter.

"We are pleased with our solid second quarter results in this seasonally slow quarter and with our continued strong sales of Android Smartphones. Momentum for no annual contract mobile broadband wireless service continues to be strong and has resulted in 19% year over year subscriber growth. Financially, we reported the highest Adjusted EBITDA in company history of $357 million, up approximately 11% from last year's second quarter," stated said Roger D. Linquist, Chairman and Chief Executive Officer of MetroPCS.

Some highlights for the quarter.

MetroPCS now serves approximately 9.1 million subscribers, up 19% from a year ago. In the first 6 months of 2011, the company added 925,000 subscribers. The company has not given a breakdown of LTE subscribers vs. CDMA subscribers.

Demand for Android Smartphones and has been strong. In the first quarter, approximately 30% of all handset sales were Androids. In the second quarter, nearly 40% of all handset sales were Androids.

MetroPCS is focused on efficiently adding data capacity to its CDMA network based on growing smartphone demand, and equally important, managing data traffic where possible by compressing and optimizing throughput.

An expansion of the LTE network is ongoing.

The company hops to begin introducing VOLTE-capable handsets early next year to move voice as well as data traffic to the new LTE network.

Q2 net subscriber additions were 199,000.

Continued economic pressure on customers has led to an increase in churn, which was 3.9% for the quarter. The increase in churn was primarily driven by an increase in gross additions.

ARPU was $40.49, up $0.65 on a year-over-year basis, and up $0.07 on a sequential basis.

2011 capital expenditures are now forecast to be $900 million to $1 billion -- an increase over the guidance given on the first quarter of 2011 earnings call . The company cited additional CDMA and LTE investments, including microwave backhaul systems for the LTE buildout.

The company also danced around the question of future spectrum purchases or wholesale leases, saying only that no decision has been made.

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