T-Mobile US Earnings Report Sets the Stage

In the first quarter, the pre-merger T-Mobile USA posted revenues of $4 billion, compared with revenues of $4.44 billion in first quarter of 2012. Net income totaled $107 million, down from $200 million a year ago. On a blended basis, the company’s average revenue per user (ARPU) fell from $44.52 in the first quarter of 2012 to $39.71.

The next quarter could tell the tale, and the story might be a good one. T-Mobile began selling the iPhone from Apple Inc. (NASDAQ: AAPL) on April 12, and in the five weeks or so since then have sold about 500,000 iPhone 5 units to new and existing customers. At a rate of 100,000 units a week, T-Mobile could sell 1.2 million iPhones in the quarter, not far behind the 1.5 million that Sprint Nextel Corp. (NYSE: S) sold in the first quarter.

The company’s CEO said:

Our first quarter operating metrics and financial results are showing positive impact from the changes we began making in the fourth quarter. Branded customer net additions turned positive for the first time since the first quarter of 2009 and our postpaid business has demonstrated significant improvement.

T-Mobile USA (pre-merger) claimed 34 million customers in the first quarter, up 579,000 sequentially. Postpaid (that is, contract) customer losses totaled 199,000, down from 510,000 in the year-ago quarter and 515,000 in the fourth quarter. The branded prepaid customer count rose by 202,000 in the quarter.

The key metric for the new T-Mobile US is its ARPU. For its branded prepaid customers, ARPU rose from $25.39 in the first quarter of 2012 to $28.25 in the first quarter of this year. The availability of the iPhone for these customers could give the company a nice revenue boost.

But T-Mobile needs to stop the bleeding in its branded postpaid customer base, where ARPU fell from $57.68 a year ago to $54.07 this year. Will the company’s lower priced iPhones and lower cost contracts turn this around? We will see at the end of the current quarter.

The consensus estimates for the second quarter call for EPS of $0.41 on revenues of $1.26 billion. For the full year, the EPS estimate is $1.19 and the revenue forecast calls for $5.06 billion in sales.

T-Mobile’s shares are inactive in the premarket this morning, having closed up 1.5% last night to $17.91. The post-merger 52-week range is $11.06 to $29.02. The consensus target price for the shares was around $23.00 before today’s report.