MetroPCS Adds 200K Subs in Q2, Boosts Capex Spending


MetroPCS (NAS: PCS) posted increases in net profit and revenue, but a drop in subscriber additions for the second quarter. The flat-rate carrier also said it will boost capital expenditures as it tries to stay ahead of increased data demands posed by smartphones running Google's (NAS: GOOG) Android platform.

The carrier said it will increase capex this year from a previous estimate of $700 million to $900 million to a new target of $900 million to $1 billion. On the company's earnings conference call, MetroPCS CEO Roger Linquist said the increase relates to both capacity increases for the company's CMDA network as well as ongoing LTE footprint expansion. He said the expenses will be used for new cell sites, radio access network equipment and core network upgrades. He said the move is to address smartphone users' data demands: "The significant increase in usage is putting demands on the system," he said.

MetroPCS, which has deployed LTE to its 14 core markets, did not disclose the number of LTE device activations it had in the quarter and did not indicate when it might do so. Linquist said the company still plans to introduce its first smartphone using Voice over LTE in the first quarter of next year, and that LTE smartphone prices likely will start to drop starting later next year.

Here is a breakdown of the carrier's key quarterly metrics:

Smartphones: MetroPCS COO Tom Keys said on the carrier's call that 38 percent of all of the handsets the company sold in the quarter were Android handsets. He noted that 25 percent of the company's subscriber base now has a smartphone. Linquist said that the carrier is working "vigorously" with its handset partners to lower the cost of smartphones. MetroPCS executives said that while increased smartphone penetration is boosting average revenue per user, it is also putting more pressure on the network.

Subscribers: MetroPCS added around 199,000 subscribers in the quarter, down from around 303,000 in the year-ago period and 725,000 in the first quarter. The company served 9.08 million customers at the end of the second quarter, up 19 percent year over year.

Financials: The company posted net profit of $84.3 million, up 5.6 percent from $79.9 million in the year-ago period. Total revenue jumped 19 percent to $1.20 billion. Service revenue clocked in at $1.11 billion, up 21 percent from $922 million in the year-ago quarter.

Churn: MetroPCS' churn rose from 3.3 percent to 3.9 percent, and MetroPCS said the jump was primarily driven by an increase in gross additions in the first quarter 2011 over the first quarter 2010 as well as continued economic pressures on its subscribers.

ARPU: The carrier's average revenue per user climbed from $39.84 to $40.49 in the second quarter. MetroPCS said the increase in ARPU was driven by continued demand for its Wireless for All and LTE rate plans.

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