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MetroPCS announces Q1 2012 results: total revenues up, new subscriber growth shrinks

Mat Smith
Bureau Chief, UK
Updated ·6 min read

Regional network MetroPCS has announced total revenues of approximately $1.3 billion for Q1 2012, up from $1.2 billion in the last quarter and up seven percent from the same period in 2011. Users on contract now total 9.5 million, with 16 percent of them making the move across to a smartphone. Net income has, however, dropped 63 percent since Q1 2011, with cost per user up 16 percent compared the same period last year. MetroPCS puts down to "retention expense" and the roll-out of its 4G network. The fifth biggest US carrier added over 131,000 new subscribers, but growth continues to slide -- it's down from 190,000 in Q4 2012. On the positive side, users are creeping onto the carrier's 4G network, with 580,000 LTE subscribers nowmaking up six percent of its total subscription base -- regardless of those creeping costs for unlimited data.

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MetroPCS Reports First Quarter 2012 Results

First Quarter 2012 Highlights Include:

Quarterly consolidated total revenues of approximately $1.3 billion, an increase of 7% over the first quarter of 2011
Quarterly service revenue of approximately $1.2 billion, an increase of 10% over the first quarter of 2011
Adjusted EBITDA of $262 million, a decrease of 8% over the first quarter of 2011
Quarterly churn of 3.1%, down 60 basis points from the fourth quarter of 2011 and flat when compared to the first quarter of 2011
Quarterly net subscriber additions of 132 thousand, resulting in a 7% increase in total subscribers over the prior twelve month period
Quarterly ARPU of $40.56, an increase of $0.14 over first quarter 2011
Surpassed 580 thousand 4G LTE subscribers, representing over 6% of total subscribers

DALLAS--(BUSINESS WIRE)--MetroPCS Communications, Inc. (NYSE: PCS), the nation's leading provider of no annual contract, unlimited, flat-rate wireless communications service, today announced financial and operational results for the quarter ended March 31, 2012. MetroPCS reported quarterly Adjusted EBITDA of $262 million for the first quarter 2012 and ended the quarter with approximately 9.5 million subscribers.

"Definition of Terms and Reconciliation of non-GAAP Financial Measures"

Roger D. Linquist, Chairman and Chief Executive Officer of MetroPCS, said, "Our first quarter results highlight our continued focus on getting affordable 4G LTE smartphones into the hands of our customers. We upgraded 16% of our subscriber base, 40% of which went from a feature phone to a smartphone, and we reported churn of 3.1%, matching the all-time low for the Company. However, the significant number of upgrades at a higher promotional handset cost during the quarter resulted in higher costs and as a result both Adjusted EBITDA and Adjusted EBITDA margins were pressured significantly.

"The wireless industry is rapidly moving towards 4G LTE and while the first quarter presented us with challenges, we believe we remain well-positioned for long-term growth and success. In wireless, speed does matter and our 4G LTE network will provide a significant enhancement in the customer experience when compared to our current 3G CDMA experience. Our service plans offer the predictability, affordability and flexibility our customers have come to expect, and with all taxes and regulatory fees included, and no contract, we believe we continue to offer the best deal in town," Linquist concluded.

Key Consolidated Financial and Operating Metrics
(in millions, except percentages, per share, per subscriber and subscriber amounts)

Three Months Ended

March 31,
2012 2011 Change
Service revenues $ 1,159 $ 1,050 10%
Total revenues $ 1,277 $ 1,194 7%
Income from operations $ 98 $ 145 -32%
Net income $ 21 $ 56 -63%

Diluted EPS $ 0.06 $ 0.15 $ (0.09)

Adjusted EBITDA(1) $ 262 $ 285 -8%

Adjusted EBITDA as a percentage of service revenues
22.6% 27.2% (460 bps)

ARPU(1) $ 40.56 $ 40.42 $ 0.14
CPGA(1) $ 235.45 $ 157.28 $ 78.17
CPU(1) $ 22.87 $ 19.79 $ 3.08
Churn-Average Monthly Rate 3.1% 3.1% 0 bps

Consolidated Subscribers
End of Period 9,478,313 8,881,055 7%
Net Additions 131,654 725,945 -82%
Penetration of Covered POPs(2) 9.3% 9.0% 30bps

(1) For a reconciliation of non-GAAP financial measures, please refer to the section entitled "Definition of Terms and Reconciliation of non-GAAP Financial Measures" included at the end of this release.

(2) Number of covered POPs covered by MetroPCS Communications, Inc. network increased 2.5 million from 3/31/11 to 3/31/12 to 102 million.

Quarterly Consolidated Results

Consolidated service revenues of approximately $1.2 billion for the first quarter of 2012, an increase of $109 million, or 10%, when compared to the prior year's first quarter.
Income from operations decreased $47 million, or 32%, for the first quarter of 2012 when compared to the prior year's first quarter.
Net income decreased $35 million, or 63%, for the first quarter of 2012 when compared to the prior year's first quarter.
Adjusted EBITDA of $262 million decreased by $23 million for the first quarter of 2012, or 8%, when compared to the prior year's first quarter.
Average revenue per user (ARPU) of $40.56 for the first quarter of 2012 represents an increase of $0.14 when compared to the first quarter of 2011. The increase in ARPU was primarily attributable to continued demand for our Wireless for All and 4G LTE service plans offset by an increase in family plan penetration from 35% of our customer base as of March 31, 2011 to 44% of our customer base as of March 31, 2012.
The Company's cost per gross addition (CPGA) of $235 for the first quarter of 2012 represents an increase of $78 when compared to the prior year's first quarter. The increase is primarily driven by increased promotional activities and lower gross additions as compared to the three months ended March 31, 2011.
Cost per user (CPU) increased to $22.87 in the first quarter of 2012, or a 16% increase over the first quarter of 2011. The increase in CPU is primarily driven by the increase in retention expense for existing customers, costs associated with our 4G LTE network upgrade and roaming expenses associated with Metro USA. During the quarter we experienced $7.13 in CPU directly related to handset upgrades compared to $4.60 in the prior year's first quarter.
Churn decreased 60 basis points from 3.7% to 3.1%, when compared to the fourth quarter of 2011, and remained flat when compared to the first quarter of 2011. The sequential decrease in churn was primarily driven by continued investment in our network, aggressive retention programs, and normal seasonal trends.