With parent company Deutsche Telekom posting its quarterly earnings today, T-Mobile USA has reported its Q2 operating results. Despite moves it is making to ramp up its network and handset lineup to compete with the bigger boys, T-Mobile — the only big U.S. carrier yet to offer the iPhone — saw revenues decline by 3.3% to $4.883 billion, down from $5.034 billion a year ago, and down from $5.050 in Q1. Meanwhile, T-Mobile USA branded customers now stand at 26.595 million, compared to 27.808 in the same quarter a year ago, a decline of 4% (including MVNO and M2M, the numbers still went down to 33.168 million from 33.585 million). Net income was also down, to $207 million from $212 million the year before.
And despite the fact that the AT&T deal to buy T-Mobile got ditched in December 2011, the operator is still recording items on its balance sheet related to it.
From the earnings, here are the lines that relate to AT&T charges:
- T-Mobile notes that adjusted OIBDA in the second quarter of 2012 “excludes special charges of $67 million, primarily consisting of employee severance costs associated with restructuring initiatives announced in the first and second quarter of 2012.” It notes that this includes a “special charge” of $30 million “primarily consisting of employee retention benefit expenses related to the terminated AT&T transaction.” The charge T-Mobile took for the same reason in Q2 2011 was $13 million.
- T-Mobile USA says it recorded a $1.2 billion increase in spectrum licenses as a result of the AWS spectrum received as part of the terminated AT&T transaction.
- It also notes accrued liabilities relating to restructuring and AT&T transaction-related costs of $9 million, significantly lower than the $109 million in the quarter a year ago.
Without a merger option on the table, T-Mobile continues to try to build itself up into a stronger fighting form on its own. That has involved a $900 million cost savings plan, network expansion, and a focus on building up its brand and handset lineup. It noted that Q2 operating income before depreciation and amortization (OIBDA) was actually up 4.8% year-on-year to $1.3 billion, with OIBDA margins up to 31% (up three percentage points).
But the crucial fact remains that it continues to see a net loss in customers. These were 205,000 in Q2 of 2012, compared to 50,000 in Q2 2011. “Customer figures in the United States continue to present a major challenge,” parent company Deutsche Telekom noted in its earnings statement. Meanwhile the new CEO of the USA operation had this to say:
“In the second quarter, T-Mobile USA continued to show considerable progress in a number of key areas delivering solid adjusted OIBDA growth. While we reported encouraging branded contract and branded prepaid churn improvements in the quarter, we remain focused on customer loyalty as we continue to execute against our strategy,” said Jim Alling, Interim CEO and President of T-Mobile USA, in a statement. “Looking ahead, T-Mobile USA will continue to invest in a number of key areas including the modernization of our network as we pave the way for LTE service in 2013, retail expansion, as well as an increased investment in promoting our brand.”
T-Mobile is currently working its way through a $4 billion 4G network upgrade that will see the carrier start to offer LTE services in 2013. Part of that process has involved a lot of spectrum pick-ups: the carrier has purchased network spectrum from Verizon Wireless to improve coverage in 15 of the top 25 markets in the country. Similarly, AT&T’s spectrum transfer, as a result of the merger plan break-up, will improve coverage in 12 of the top 20 U.S. markets. A deal with Leap Wireless will add better coverage in four states. It’s currently working with Nokia Siemens Networks to install LTE kit in 37,000 cell sites.
Among the handsets the carrier has rolled out over the quarter have been the HTC One S and the Samsung Galaxy S III, both built on Android. While HTC has actually seen its performance in the U.S. improve lately, and the S3 has been largely a success worldwide, Android has actually started to see some pressure in the U.S. according to some analysts.
Parent Deutsche Telekom, meanwhile, reported earnings largely in line with expectations, although earnings before tax, depreciation and amortization were a flat $5.8 billion in comparison to last year.