New price plans rake in subscribers for MetroPCS in 1st qtr, but hurt bottom line; shares rise
By APThursday, May 6, 2010
MetroPCS rakes in subscribers in 1Q; shares jump
DALLAS — Price cuts helped MetroPCS Communications Inc. gain and keep subscribers despite tough competition in the first quarter, the wireless carrier said Thursday.
The Dallas-based company’s shares jumped 64 cents, or 8.3 percent, to $8.38 in morning trading, as revenue came in well above analyst expectations.
MetroPCS added a net 691,602 subscribers in the first three months of the year, about double the rate of recent quarters. It was helped by a revamping of its price plans in January. It added free features and started including taxes in the quoted prices for its flat-rate calling plans, moves that together amounted to a price cut.
MetroPCS provides unlimited calling for flat monthly rates, with coverage mainly in cities. The market for prepaid or no-contract service is still booming, even as growth of more traditional “postpaid” service as stalled this quarter. Competition is also fierce, with Sprint Nextel Corp., T-Mobile USA and Tracfone LLC all targeting the same customers.
The price cuts also held back earnings. MetroPCS said it had net income of $23 million, or 6 cents per share, in the first three months of 2010. That compared with earnings of $44 million, or 12 cents per share, a year ago.
Revenue was $971 million, up 22 percent from $795 million a year ago.
Analysts polled by Thomson Reuters had on average expected earnings of 6 cents per share on revenue of $942 million.
Analyst Craig Moffett at Sanford Bernstein said the first-quarter numbers suggested MetroPCS is getting “more than its piece of the action” in the prepaid market. The price plans introduced in January attracted more subscribers than he expected, and MetroPCS still has very low costs, he wrote in a morning research report.
MetroPCS ended the quarter with 7.3 million subscribers, making it the fifth-largest U.S. carrier that owns its own network.
