MetroPCS Subscriber Growth Slows Markedly in 2Q
NEW YORK -(Dow Jones)- MetroPCS Communications saw a 19% increase in net subscriber additions in the second quarter, but the growth failed to meet Wall Street's lofty expectations.
MetroPCS, which offers an unlimited pre-paid wireless service to primarily low-income and credit-challenged customers, said it added 183,530 customers in the period, bringing its base to 4.6 million.
While the numbers look good, analysts were expecting better. Wall Street had an average forecast of 190,000. Lately, investors have been jittery on wireless carriers that cater to economically sensitive customers, given the deteriorating macro environment.
Shares fell 9% to $15.67.
Of concern was the growth in its existing markets, which dropped 66%. MetroPCS is in the middle of expanding its footprint, and saw the lion's share of growth in new markets such as Las Vegas. Boston and New York are on tap in the coming months. Growth fell dramatically from the first quarter, when the carrier added 451,733 customers, although a sequential decline is typical due to seasonal factors.
Still, analysts had reason to be optimistic about the quarter. In addition to the early launch of the Las Vegas market, MetroPCS was seen benefiting from a pull-back in Sprint Nextel's competitive offerings. The tax stimulus checks were seen as another potential catalyst, according to Bank of America analyst David Barden.
The turnover rate for the quarter was down 0.3 percentage point to 4.5%. It's up 0.5 percentage point from the first quarter, which the company said is consistent with seasonal patterns.
Wireless carriers that offer no contracts or upfront charges have been punished in recent months because of fears that the economic conditions make them particularly vulnerable. Virgin Mobile USA, which also targets teen-agers and low-income customers with a pre-paid model, in the last quarter reported a 94% decline in net subscriber addition. The increasing number of pre-paid service providers has placed more pressure on each player.
But some on Wall Street believe MetroPCS is better prepared to handle the downturn, particularly as it looks to expand.
"We believe the 30% growth that MetroPCS is posting year over year in total subscribers to 4.6 million is a strong statement about the run-rate health of the business and the inherent strength of the model," Barden said.
Unlike Virgin Mobile, which charges on a per-minute basis, MetroPCS requires a flat rate for unlimited calling in a local area.
Chairman and Chief Executive Roger D. Linquist said MetroPCS subscriber growth during the economic downturn demonstrates the resiliency of the business.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com
(Jennifer Hoyt contributed to this report.)
(END) Dow Jones Newswires
Posted to the site on 3rd July 2008
