UPDATE 2-MetroPCS goes nationwide in quest for growth

Thu Nov 4, 2010 11:28am EDT

* Q3 EPS $0.22 vs est $0.21; Q3 rev misses estimates

* Net subscribers up from yr-ago, down sequentially

* MetroPCS goes national with services

* Plans to launch multiple Android devices

* Churn falls, but ARPU drops (Rewrites; adds conference call details, analyst comments, updates shares)

By S. John Tilak

BANGALORE, Nov 4 (Reuters) - MetroPCS Communications Inc PCS.N reported quarterly results that edged past market estimates and the low-cost wireless carrier said it will take its services nationwide, sending its shares up 5 percent to a year-high. The Metro USA nationwide service launched on Thursday will cover more than 90 percent of the U.S. population, and is expected to fuel subscriber growth.

The Richardson, Texas-based company's wireless service currently serves the big cities, including key markets New York, Los Angeles, Boston and Philadelphia.

The expansion will likely be possible through roaming agreements with other carriers, analysts said, with MetroPCS having to pay fees to the carriers when it rents their networks.

The launch will have a dual effect on MetroPCS, which competes Sprint-Nextel (S.N) unit Boost Mobile, America Movil's (AMXL.MX)(AMX.N) Tracfone and Leap Wireless LEAP.O, Mizuho Securities USA analyst Michael Nelson said.

It has the potential to further stimulate subscriber growth, but on the flip side, it could increase the cost of service and possibly hurt margins, Nelson said.

MetroPCS Chief Financial Officer Braxton Carter, however, said on a conference call with analysts that he does not see a significant margin impact from the launch.

On Tuesday, rival Leap Wireless posted a wider-than-expected quarterly loss and said it expects its business transition to hurt fourth quarter results as well. [ID:nSGE6A10LM]

In the third quarter, the company's cost per user rose 7 percent to $18.47, driven partly by a rise in handset subsidies to existing customers.

Due to increased competition in the prepaid space, wireless firms are having to offer more services and subsidies to retain customers, pushing up costs as a result.

MetroPCS, with a market value of about $3.84 billion, also became the first U.S. carrier to roll out commercial high-speed wireless Long Term Evolution (LTE) services, beating industry heavyweight Verizon Wireless.

It now offers LTE services in Dallas/Fort Worth, Detroit, Las Vegas, Los Angeles and Philadelphia.

Chief Operating Officer Tom Keys said the company currently offers a Samsung Craft LTE handset, but plans to introduce multiple handsets based on Google Inc's (GOOG.O) Android operating system in the fourth quarter.

NEW PLANS DRIVE GROWTH

The tax-inclusive plans it launched in January helped MetroPCS post better-than-expected subscriber additions and slow customer dropouts in the third quarter.

The company added 223,000 net new subscribers, up more than three-fold from a low-point in the previous year, but down about 26 percent from the second quarter.

Churn rate, a measure of customer attrition, fell 2 percentage points to 3.8 percent.

However, average revenue per user dropped 3 percent to $39.69.

Third-quarter net income rose to $77.3 million, or 22 cents a share, from $73.6 million, or 21 cents a share, a year earlier. Revenue rose 14 percent to $1.02 million.

Shares of MetroPCS were up 4 percent at $11.31 in late morning trade on the New York Stock Exchange. They touched a 52-week high of $11.42 earlier in the session.

The stock has gained 74 percent in the last 52 weeks, outperforming a 14 percent rise in the broader S&P 500 .SPX index. (Reporting by S. John Tilak in Bangalore; Editing by Prem Udayabhanu, Unnikrishnan Nair)