Monday, January 7, 2013

MetroPCS Q4 and 2012 Results - Ouch

MetroPCS released their Q4 2012 and year to date 2012 results ahead of the Q4 earnings call later in the month. What stands out is the surprise subscriber loss over the year. 

With over 93K subs lost in what is supposed to be a hot Q4 holiday selling season,  the results suggest that the prepaid sector is as cut throat and competitive as ever. The result of these losses invariably is a function of its gross additions.  The simple theory goes, if you have a good distribution and acquisition network, you can help offset the subscriber losses and in an optimal scenario, come out ahead.

MetroPCS' gross additions were also down in Q4 and end of year compared to 2011.  Churn is down a small bit at 0.1% or 10 basis points in financial speak. It's a small win.  There are other metrics that can help tell the story of what's going on such as EBITDA/OIBIDA margin, ARPU, CPU and CPGA but we'll have to wait on that.  While this may look bad, one can give MetroPCS the benefit of a sliver of doubt assuming that they could be letting go of low-value or high-risk users for more profitable customers.

Yet the prepaid sector is very competitive with many similar offerings from Tier 1 competitors (Verizon Wireless, T-Mobile, AT&T, and Sprint prepaid brands Boost Mobile and Virgin Mobile) and MVNOs such as Tracfone's Straight Talk and Net10.  Another worry may be any hint of distributor apathy ahead of the mid-2013 T-Mobile-MetroPCS transaction. While T-Mobile intends to retain the MetroPCS brand, MetroPCS better figure out how to reverse subscriber losses before the deal is consummated.