T-Mobile Needs More iPhones... and Revenue Per User
T-Mobile reported its third-quarter earnings earlier this week, and while the company had good news for its subscriber growth, sales of Apple's new iPhones on the network weren't part of it -- and neither was average revenue per user.
Low supply, high demand
In the earnings conference call, T-Mobile said iPhones made up just 15% of the company's smartphone sales for the quarter. AllThingsD reported that T-Mobile has sold about 3.6 million branded phones, so iPhones sales equaled about 540,0000 for the quarter. That number is significantly lower than Verizon Communications' 3.9 million iPhones sold and Sprint's 1.4 million.
iPhone 5s. Source: Apple.
T-Mobile wasn't the only carrier that experienced general supply constraints for the 5s, and even Apple's website still lists the device as shipping in two to three weeks (as opposed to 24 hours for the 5c). Some have speculated that T-Mobile didn't receive as high of a priority as other carriers because of its relative size in the U.S. market.
But despite the short supply of new iPhones, T-Mobile said in its earnings call that sales from all iPhone models were a significant part of the company's nearly $1 billion year-over-year handset revenue growth.
In addition to that growth, T-Mobile also saw its postpaid customers -- the ones who sign up for monthly plans -- increase by a net of 648,000. The third quarter was T-Mobile's second straight quarter of subscriber growth after years of fleeing customers, and brought its total postpaid customers to about at about 21.4 million. T-Mobile CEO John Legere said in a press release that customer growth comes in part from the MetroPCS acquisition and that the company added more customers in the third quarter than the rest of the industry.
But it's not all sunshine and roses for T-Mobile. The company reported a net loss of $36 million in the third quarter, more than the loss of $16 million in the previous quarter. Gaining customers is a costly business, and T-Mobile spent $1.2 billion to do so in the third quarter, up about one-third year over year. The company will need to spend more money gaining additional customers and expanding its network, all while it's seeing decreasing average revenue per user, or ARPU. In the third quarter, T-Mobile's branded post-paid ARPU fell by $1.40 to $52.40.
Unabashedly moving forward
T-Mobile has made a number of moves over the past year that have differentiated it from its competitors and brought it back into the forefront for potential wireless customers. Some have been critical of T-Mobile's un-carrier approach, but so far its simple payment plans, 4G LTE expansion to 254 cities and 203 million people, and offering perks like free tablet data and free data and texting internationally have helped the company make big subscriber gains.
But investors should not only look for subscriber growth, but also for average revenue per user increases as well. With T-Mobile spending tons of money to grow its customer base and expand its network, the company can't simply undercut its rivals' prices to gain customers -- it needs to bring in significant revenue from the ones it already has.
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The article T-Mobile Needs More iPhones... and Revenue Per User originally appeared on Fool.com.
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