T-Mobile USA Drops in Q1; Executives Confident in Merger Approval
T-Mobile USA’s Q1 profit dropped more than 60 percent year-over-year to $135 million as the carrier lost 99,000 subscribers. Parent company Deutsche Telekom CEO Rene Obermann blamed the decline in part on the intense competition in the U.S. market and said he’s confident the proposed AT&T/T-Mobile deal would get approved.
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The U.S. is a very competitive market and that competitive intensity is likely to remain in the forthcoming years, so there’s no reason to believe the transaction with AT&T won’t be approved, Obermann said on a conference call Friday. Obermann reiterated what he sees as benefits of the combination to U.S. consumers. The most important is the faster LTE rollout through a combination of spectrum and networks to 95 percent of the U.S., he said. T-Mobile USA lacks the spectrum for a complete rollout of LTE and spectrum is a major reason for the divestiture, Obermann said. He said he believes the deal should close in the first half of 2012, despite the amount of regulatory scrutiny it’s attracting.
The deal with AT&T won’t change the focus of T-Mobile USA, Obermann said. Until the closing of the deal, T-Mobile will continue to challenge its competitors and compete aggressively in the U.S. market, he said. T-Mobile USA now has 33.6 million subscribers, down from 33.7 million a year ago. Contract churn was 2.4 percent, up from 2.2 percent a year earlier. Q1 results showed a “mixed picture,” Obermann said. There were some bright spots: Some 9.1 million subscribers are using 3G or HSPA+ (or 4G, as advertised by the carrier), an increase of nearly 1 million. Data service revenue was $1.3 billion, up 20 percent from the previous year. T-Mobile’s connected device net customer additions were 192,000 in the quarter, up from 113,000 from the previous quarter.
Deutsche Telekom profits fell 37 percent to around $696 million. The business remained relatively strong in Germany but the company faced a variety of challenges elsewhere, including competition in the U.S., economic difficulties in Greece and Romania and a new tax in Hungary.