UPDATE 4-MetroPCS profit tops Street; customer additions robust

Thu Aug 5, 2010 10:31am EDT

* Q2 EPS $0.22 beats estimates

* Q2 rev rises 18 percent to $1 billion

* Net subscriber additions rise

* Churn drops; ARPU down

* Shares up 8 percent (Adds conference call details; updates shares)

By S. John Tilak

BANGALORE, Aug 5 (Reuters) - Low-cost wireless carrier MetroPCS Communications Inc PCS.N reported a quarterly profit that beat market estimates, driven by strong growth in new subscribers and fewer customer dropouts, sending its shares up 8 percent.

The company offers unlimited prepaid services, where customers pay a monthly fee in advance for unlimited phone calls without committing to a long-term contract.

MetroPCS benefited from its tax-inclusive plans, called Wireless for All, that it launched in January. The plans, whose costs ranged from $40 to $60 per month, helped it retain customers and gain market share.

The company has been locked in an intense competitive battle as more companies show interest in the U.S. prepaid market, a bright spot in the wireless industry with postpaid growth maturing.

"The competitive landscape has stabilized over the last two quarters," Pacific Crest Securities analyst Steve Clement said. MetroPCS was outperforming the market, he said.

The company's rivals include Sprint-Nextel (S.N) unit Boost Mobile, America Movil's (AMXL.MX)(AMX.N) Tracfone and Leap Wireless LEAP.O.

MetroPCS said in the aggregate of all its markets, it had one third of all no-contract subscribers, citing market research.

The results were "very solid" and better-than-expected across all metrics, Clement said.

Second-quarter net subscriber additions were 303,000, compared with 206,000 a year ago and 692,000 in the first quarter, when it first gained from the tax-inclusive plans.

Churn rate, a measure of customer attrition, dropped to 3.3 percent from 5.8 percent. Average revenue per user fell 2 percent to $39.84, but was higher than what most analysts were expecting.

Increasing competition could result in consolidation, analysts have said. Investors have long anticipated a merger of MetroPCS and Leap.

LTE BOOST

MetroPCS is on track for its initial long term evolution (LTE) broadband services launch in select metropolitan areas in the second half of this year, it said.

Its LTE service offerings could have a positive impact on its average revenue per user, Chief Operating Officer Thomas Keys said on a conference call with analysts. The company has tied up with firms like Ericsson (ERICb.ST) and Samsung Electronics (005930.KS) for its LTE launch.

Its first LTE market launches are expected to be in Dallas-Fort Worth and Las Vegas.

Second-quarter net income rose to $80 million, or 22 cents a share, from $26 million, or 7 cents a share, a year earlier. Revenue rose 18 percent to $1.01 billion.

Analysts expected earnings of 13 cents a share, excluding exceptional items, on revenue of $990.4 million, according to Thomson Reuters I/B/E/S.

Adjusted earnings before interest, taxes, depreciation and amortization were $322 million, up 38 percent. Analysts were looking for EBITDA of $254.9 million.

In the third quarter, subscriber additions would decline and churn would rise due to seasonality, Keys said on the call.

Shares of MetroPCS were up 6 percent, or 52 cents, at $9.31 Thursday on the New York Stock Exchange. They touched a high of $9.53 earlier in the session.

The stock is down 29 percent in the last 52 weeks. This compares with a 12 percent rise in the broader S&P 500 Index .SPX.

On Tuesday, rival Leap posted a wider-than-expected quarterly loss as customers quit its service, prompting a sell-off in the shares despite new plans to try and improve sales. [ID:nN03185298]

The success of the tax-inclusive plans from MetroPCS might bode well for Leap, which launched all-inclusive plans of its own on Tuesday. (Reporting by S. John Tilak; Editing by Jarshad Kakkrakandy)

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