BELLEVUE, Wash.----Aug. 10, 2006--T-Mobile USA (NYSE: DT):
- 613,000 net new customers added in the quarter, of which
507,000 were new postpay customers
- Stable postpay ARPU -- $55, up from $54 in the first quarter
of 2006 and unchanged compared to the second quarter of 2005
- $3.6 billion in service revenues in the second quarter of
2006, up 18% from the second quarter of 2005
- $1.2 billion in Operating Income Before Depreciation and
Amortization (OIBDA) in the quarter, a 12% increase over the
second quarter of 2005
- T-Mobile USA ranked highest, in a tie, in the semi-annual J.D.
Power and Associates Wireless Customer Care Performance Study
and ranked top in VocaLabs satisfaction study on the quality
of customer service
- Continued investment in network quality -- over 960 new cell
sites on air during the quarter
In the second quarter of 2006 T-Mobile USA added 613,000 net new
customers, down from 972,000 in the second quarter of 2005, and the
1.04 million net customers added in the first quarter of 2006. Postpay
customers made up 83% of the second quarter customer growth, up from
70% in the first quarter of 2006, and comprised 84% of T-Mobile USA's
total customer base at June 30, 2006.
"In the second quarter, we followed through on a long-term planned
shift in our business aimed at investing in longer relationships with
customers," said Robert Dotson, President and Chief Executive Officer,
T-Mobile USA. "One of the major changes executed was a move to 2-year
service agreements. While this change resulted in lower net add growth
in April during the transition, by June, we finished with one of our
best months of top-line sales since the holidays. Today, we are now
well positioned in our drive to reduce customer churn to even lower
levels while ensuring our customers continue to Get More from their
T-Mobile service. Also encouraging during the quarter was the
continued strong growth in our sales of converged devices. We have now
surpassed the milestone of 800,000 BlackBerry users, with an increase
of 51,000 in the second quarter of 2006, equivalent to 10% of the net
growth in postpay customers during the quarter."
Rene Obermann, CEO of T-Mobile International and member of the
Board of Management of Deutsche Telekom remarked: "T-Mobile USA has
delivered quality growth for the business quarter after quarter, year
after year. We remain very optimistic about the future growth
opportunities for T-Mobile in the U.S. market. We are also encouraged
by the U.S. team's continued success in delivering consistently strong
financial metrics."
T-Mobile USA reported OIBDA of $1.21 billion in the second quarter
of 2006, up from $1.10 billion in the first quarter of 2006 and up
from $1.08 billion in the second quarter of 2005. T-Mobile USA's net
income for the second quarter of 2006 was $233 million, down from $241
million in the first quarter of 2006 and $387 million in the second
quarter of 2005. The decrease in net income, despite higher operating
income, is primarily due to higher income tax expense.
T-Mobile USA service revenues, consisting of postpay, prepaid,
roaming and other service revenues rose to $3.59 billion in the second
quarter of 2006, up from $3.39 billion in the first quarter of 2006
and $3.04 billion in the second quarter of 2005. The increases are
primarily due to growth in the number of postpay customers. Other
revenues were $177 million in the second quarter of 2006, down from
$198 million in the first quarter of 2006 and $269 million in the
second quarter of 2005. Other revenues include Wi-Fi revenues,
co-location rental income, and wholesale revenues from the usage of
our network in California, Nevada, and New York by customers of
Cingular Wireless LLC ("Cingular"). The sequential and year on year
decrease in other revenues reflects the ongoing migration of
Cingular's customers to their network following the dissolution of our
network sharing venture in early 2005. This migration also contributed
to the slight reduction in OIBDA margin compared to the second quarter
of 2005. Total revenues, including service, equipment, and other
revenues were $4.21 billion in the second quarter of 2006, up from
$4.04 billion in the first quarter of 2006 and $3.61 billion in the
second quarter of 2005.
Average Revenue Per User ("ARPU" as defined in note 1 to the
Selected Data, below) was $52 in the second quarter of 2006, up from
$51 in the first quarter of 2006 and down from $54 in the second
quarter of 2005. Postpay ARPU was $55 in the second quarter of 2006,
up from $54 in the first quarter of 2006 and unchanged compared to the
second quarter of 2005. The sequential increase in both blended and
postpay ARPU related primarily to continued data revenue growth and
seasonally strong roaming revenues. The fall in blended ARPU year on
year is due to a higher proportion of prepaid customers in the
customer base in 2006 and the decrease in prepaid ARPU.
Data services revenue from postpay and prepaid customers continued
to grow, reaching a total of $390 million in the second quarter of
2006. Data revenues, which are a component of service revenues,
represented 10.9% of blended ARPU, or $5.65 per customer, in the
second quarter of 2006, compared to 10.1%, or $5.12, in the first
quarter of 2006 and 7.5%, or $4.03, in the second quarter of 2005.
T-Mobile USA's data offering was further strengthened during the
quarter with the launch of the Sidekick 3 and BlackBerry 8700g. The
number of BlackBerry users rose above 800,000 by the end of the
quarter, with 51,000 net new users. Continued strong growth in
messaging (both SMS and MMS) helped contribute to the increase in data
ARPU. The total number of SMS and MMS messages increased to 7.9
billion in the second quarter of 2006, compared to 6.9 billion in the
first quarter of 2006 and 4.1 billion in the second quarter of 2005.
Postpay churn declined to 2.2% in the second quarter of 2006
compared to 2.3% in the second quarter of 2005 and rose slightly from
2.1% in the first quarter of 2006. Prepaid churn was 6.6% in the
second quarter of 2006, compared to 5.8% in the first quarter of 2006
and 6.4% in the second quarter of 2005. Blended churn, including both
postpay and prepaid customers, was 2.9% in the second quarter of 2006,
up from 2.7% in the first quarter of 2006 and 2.8% in the second
quarter of 2005. Compared to the second quarter of 2005, blended churn
increased due to the higher proportion of prepaid customers in the
total customer base.
The average cost of acquiring a customer, Cost Per Gross Add
("CPGA", as defined in note 3 to the Selected Data, below) was $322 in
the second quarter of 2006, up from $275 in the first quarter of 2006
and $310 in the second quarter of 2005. Compared to the first quarter
of 2006 the increase in CPGA is primarily due to higher advertising
costs, fewer gross adds due largely to the move to two year service
agreements, and the change in mix of gross adds towards postpay.
The average cash cost of serving customers, Cash Cost Per User
("CCPU", as defined in note 2 to the Selected Data, below), was $24.96
per customer per month in the second quarter of 2006, down from $25.66
in the first quarter of 2006 and $25.66 in the second quarter of 2005.
The sequential decrease in CCPU compared to the first quarter of 2006
was primarily due to a fall in the average upgrade handset subsidy
loss.
Capital expenditures were $593 million in the second quarter of
2006, compared with $770 million in the first quarter of 2006 and $815
million in the second quarter of 2005. As part of its ongoing
commitment to network coverage and quality, T-Mobile USA added
approximately 960 new cell sites in the second quarter of 2006,
bringing the total number of cell sites to over 34,500.
T-Mobile USA's industry-leading commitment to customer care and
customer satisfaction was further reinforced and validated during the
quarter as T-Mobile achieved the top ranking in the semi-annual J.D.
Power and Associates Wireless Customer Care Performance Study for the
fourth consecutive reporting period and also topped the VocaLabs
satisfaction study on the quality of customer service among the
largest wireless phone companies. These successes build upon other
recent achievements -- earlier this year, T-Mobile USA topped the J.D.
Power and Associates 2006 Wireless Regional Customer Satisfaction
Index Study in all six regions and the J.D. Power and Associates
Wireless Customer Care Performance Study, each for the third-straight
reporting period.
This press release includes non-GAAP financial measures. The
non-GAAP financial measures should be considered in addition to, but
not as a substitute for, the information provided in accordance with
GAAP. Reconciliations from the non-GAAP financial measures to the most
directly comparable GAAP financial measures are provided below
following Selected Data and the financial statements.
T-Mobile USA, Inc. ("T-Mobile USA") is the U.S. operation of
T-Mobile International AG & Co. KG ("T-Mobile International"), the
mobile communications subsidiary of Deutsche Telekom AG ("Deutsche
Telekom") (NYSE: DT). In order to provide comparability with the
results of other U.S. wireless carriers all financial amounts are in
US dollars and are based on accounting principles generally accepted
in the United States ("GAAP"). T-Mobile USA results are included in
the consolidated results of Deutsche Telekom, but differ from the
information contained herein as Deutsche Telekom reports financial
results in accordance with International Financial Reporting Standards
(IFRS).
SELECTED DATA FOR T-MOBILE USA
(`000) Q2 06 Q1 06 YE 05 Q4 05 Q3 05 Q2 05
----------------------------------------------------------------------
Covered population 238,000 234,000 233,000 233,000 232,000 232,000
----------------------------------------------------------------------
Customers, end of
period 23,338 22,725 21,690 21,690 20,302 19,243
----------------------------------------------------------------------
Thereof postpay
customers 19,656 19,149 18,424 18,424 17,512 16,796
----------------------------------------------------------------------
Thereof prepaid
customers 3,682 3,576 3,266 3,266 2,790 2,447
----------------------------------------------------------------------
Net customer additions 613 1,035 4,376 1,388 1,059 972
----------------------------------------------------------------------
----------------------------------------------------------------------
Minutes of use/post
pay customer/month 1,041 1,013 963 985 985 960
----------------------------------------------------------------------
Postpay churn 2.2% 2.1% 2.3% 2.3% 2.4% 2.3%
----------------------------------------------------------------------
Prepaid churn 6.6% 5.8% 6.6% 6.6% 6.6% 6.4%
----------------------------------------------------------------------
Blended churn 2.9% 2.7% 2.9% 2.9% 2.9% 2.8%
----------------------------------------------------------------------
($ / month)
----------------------------------------------------------------------
ARPU (blended)(1) 52 51 53 52 53 54
----------------------------------------------------------------------
ARPU (postpay) 55 54 55 54 55 55
----------------------------------------------------------------------
ARPU (prepaid) 22 22 25 24 24 27
----------------------------------------------------------------------
Cost of serving
(CCPU)(2) 24.96 25.66 25.23 24.32 24.65 25.66
----------------------------------------------------------------------
Cost per gross add
(CPGA)(3) 322 275 297 264 271 310
----------------------------------------------------------------------
($ million)
----------------------------------------------------------------------
Total revenues 4,209 4,039 14,806 3,953 3,802 3,614
----------------------------------------------------------------------
Service revenues(1) 3,586 3,389 12,308 3,261 3,153 3,040
----------------------------------------------------------------------
OIBDA(4) 1,210 1,103 4,185 1,112 1,166 1,081
----------------------------------------------------------------------
OIBDA margin (5) 32% 31% 32% 32% 34% 33%
----------------------------------------------------------------------
Capital expenditures 593 770 5,045 807 585 815
----------------------------------------------------------------------
----------------------------------------------------------------------
Cell sites on-air 34,500 33,600 32,900 32,900 31,800 30,900
----------------------------------------------------------------------
Since all companies do not calculate these figures in the same
manner, the information contained in this press release may not be
comparable to similarly titled measures reported by other companies.
(1) Average Revenue Per User ("ARPU") represents the average monthly
service revenue we earn from our customers. ARPU is calculated by
dividing service revenues for the specified period by the average
customers during the period, and further dividing by the number of
months in the period. We believe ARPU provides management with
useful information to evaluate the recurring revenues generated
from our customer base.
Service revenues include postpay, prepaid, and roaming and other
service revenues, and do not include equipment sales and other
revenues. Revenues from our Wi-Fi business, co-location rental
income, and revenues for network usage by Cingular customers who
have not yet transitioned from the former joint venture networks
in California, Nevada, and New York, are therefore not included in
ARPU. The joint venture was terminated at the beginning of 2005.
(2) The average cash cost of serving customers, or Cash Cost Per User
("CCPU") is a non-GAAP financial measure and includes all network
and general and administrative costs as well as the subsidy loss
unrelated to customer acquisition. Subsidy loss unrelated to
customer acquisition includes upgrade handset costs offset by
upgrade equipment revenues and other related direct costs. This
measure is calculated as a per month average by dividing the total
costs for the specified period by the average total customers
during the period and further dividing by the number of months in
the period. We believe that CCPU, which is a measure of the costs
of serving a customer, provides relevant and useful information
and is used by our management to evaluate the operating
performance of our business.
(3) Cost Per Gross Add ("CPGA") is a non-GAAP financial measure and is
calculated by dividing the costs of acquiring a new customer,
consisting of customer acquisition costs plus the subsidy loss
related to customer acquisition for the specified period, by gross
customers added during the period. Subsidy loss related to
customer acquisition consists of costs directly incurred to
acquire new customers -- such as handset and accessory costs --
offset by related revenues. We believe that CPGA, which is a
measure of the cost of acquiring a customer, provides relevant and
useful information and is used by our management to evaluate the
operating performance of our business.
(4) OIBDA is a non-GAAP financial measure, which we define as
operating income before depreciation and amortization. In a
capital-intensive industry such as wireless telecommunications, we
believe OIBDA, as well as the associated percentage margin
calculation, to be meaningful measures of our operating
performance. OIBDA should not be construed as an alternative to
operating income or net income as determined in accordance with
GAAP, as an alternative to cash flows from operating activities as
determined in accordance with GAAP or as a measure of liquidity.
We use OIBDA as an integral part of our planning and internal
financial reporting processes, to evaluate the performance of our
senior management and to compare our performance with that of many
of our competitors. We believe that operating income is the
financial measure calculated and presented in accordance with GAAP
that is the most directly comparable to OIBDA.
(5) OIBDA margin is a non-GAAP financial measure, which we define as
OIBDA (as described in note 4 above) divided by total revenues
less equipment sales.
T-MOBILE USA
Condensed Consolidated Balance Sheets
(dollars in millions)
(unaudited)
June 30, Dec. 31,
2006 2005
-----------------
ASSETS
Current assets:
Cash and cash equivalents.....................$ 50 $ 57
Accounts receivable, net of allowance for
doubtful accounts of $157 and $151,
respectively................................. 2,124 2,116
Accounts receivable from affiliates........... 1,034 188
Inventory..................................... 544 409
Current portion of net deferred tax assets.... 743 275
Other current assets.......................... 487 437
-----------------
Total current assets...................... 4,982 3,482
-----------------
Property and equipment, net of accumulated
depreciation of $6,299 and $5,134, respectively.... 10,686 10,805
Goodwill............................................ 10,701 10,701
Spectrum licenses................................... 11,493 11,510
Other intangible assets, net of accumulated
amortization of $371 and $282, respectively........ 151 241
Investments in and advances to unconsolidated
affiliates......................................... 5 5
Other assets and investments........................ 167 248
-----------------
$ 38,185 $ 36,992
=================
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable..............................$ 919 $ 941
Payables to affiliates........................ 77 53
Accrued liabilities........................... 2,345 1,082
Deferred revenue.............................. 366 373
Current portion of notes payable to affiliates 700 0
Construction accounts payable................. 402 724
-----------------
Total current liabilities.................. 4,809 3,173
-----------------
Long-term payables to affiliates.................... 5,748 6,457
Deferred income tax liabilities..................... 1,709 906
Other long-term liabilities......................... 677 1,697
-----------------
Total long-term liabilities......... 8,134 9,060
-----------------
Voting preferred stock held by parent company....... 5,000 5,000
Minority interest in equity of consolidated
subsidiaries....................................... 74 65
Commitments and contingencies
Shareholder's equity:
Common stock.................................. 39,452 39,452
Accumulated deficit........................... (19,284) (19,758)
-----------------
Total shareholder's equity................ 20,168 19,694
-----------------
$ 38,185 $ 36,992
=================
T-MOBILE USA
Condensed Consolidated Statements of Operations
(dollars in millions)
(unaudited)
Quarter Quarter Quarter
Ended Ended Ended
June 30, Mar. 31, June 30,
2006 2006 2005
-----------------------------
Revenues:
Postpay.................................. $ 3,218 $ 3,038 $2,725
Prepaid................................ 241 229 179
Roaming and other services............. 127 122 136
Equipment sales........................ 446 452 305
Other.................................. 177 198 269
---------------------------
Total revenues...................... 4,209 4,039 3,614
---------------------------
Operating expenses:
Network................................ 878 849 718
Cost of equipment sales................ 702 737 575
General and administrative............. 682 661 572
Customer acquisition................... 737 689 668
Depreciation and amortization.......... 651 594 585
---------------------------
Total operating expenses............ 3,650 3,530 3,118
---------------------------
Operating income......................... 559 509 496
Other income (expense):
Interest expense....................... (134) (111) (121)
Equity in net losses of unconsolidated
affiliates............................ 1 - -
Interest income and other, net......... 11 9 51
---------------------------
Total other income (expense)........... (122) (102) (70)
---------------------------
Income before income taxes............... 437 407 426
Income tax expense....................... (204) (166) (39)
---------------------------
Net income............................... $ 233 $ 241 $ 387
===========================
T-MOBILE USA
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
(unaudited)
Quarter Quarter
Ended Ended
June 30, June 30,
2006 2005
-------------------
Operating activities:
Net income.....................................$ 233 $ 387
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............ 651 585
Income tax expense....................... 204 39
Amortization of debt discount and
premium, net............................ (8) (8)
Equity in net income of unconsolidated
affiliates.............................. (1) -
Stock-based compensation................. - 1
Allowance for bad debts.................. 16 1
Deferred rent............................ 28 40
Other, net............................... 46 (49)
Changes in operating assets and
liabilities:
Accounts receivable................. 97 (124)
Inventory........................... (82) 32
Other current assets................ 3 162
Accounts payable.................... 7 159
Accrued liabilities................. (16) (112)
------------------
Net cash provided by operating activities... 1,178 1,113
------------------
Investing activities:
Purchases of property and equipment............ (593) (580)
Joint venture and network transaction with
Cingular...................................... - -
Acquisitions of spectrum licenses and wireless
properties.................................... - (235)
Proceeds on disposal of assets................. 20 16
Investments in and advances to unconsolidated
affiliates, net............................... 1 -
Short term affiliate loan receivable........... (600) -
------------------
Net cash used in investing activities....... (1,172) (799)
------------------
Financing activities:
Long-term debt repayments to affiliates........ - (365)
Change in minority interest.................... - (22)
------------------
Net cash used in financing activities....... - (387)
------------------
Change in cash and cash equivalents................ 6 (73)
Cash and cash equivalents, beginning of period..... 44 277
------------------
Cash and cash equivalents, end of period...........$ 50 $ 204
==================
T-MOBILE USA
Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures
(dollars in millions, except for CPGA and CCPU)
(unaudited)
OIBDA can be reconciled to our operating income as follows:
Q2 2006 Q1 2006 YE 2005 Q4 2005 Q3 2005 Q2 2005
--------------------------------------------------
OIBDA $1,210 $1,103 $4,185 $1,112 $1,166 $1,081
Depreciation and
amortization (651) (594) (2,229) (567) (558) (585)
--------------------------------------------------
Operating income $559 $509 $1,956 $545 $608 $496
==================================================
The following schedule reflects the CPGA calculation and provides
a reconciliation of cost of acquiring customers used for the CPGA
calculation to customer acquisition costs reported on our condensed
consolidated statements of operations:
Q2 Q1 YE Q4 Q3 Q2
2006 2006 2005 2005 2005 2005
----------------------------------------------
Customer acquisition
costs $737 $689 $2,792 $756 $657 $668
Plus: Subsidy loss
Equipment sales (446) (452) (1,529) (479) (414) (305)
Cost of equipment
sales 702 737 2,622 738 648 575
----------------------------------------------
Total subsidy loss 256 285 1,093 259 234 270
----------------------------------------------
Less: Subsidy loss
unrelated to customer
acquisition (162) (200) (629) (171) (133) (153)
----------------------------------------------
Subsidy loss related
to customer
acquisition 94 85 464 88 101 117
----------------------------------------------
Cost of acquiring
customers $831 $774 $3,256 $844 $758 $785
==============================================
CPGA ($ / new
customer added) $322 $275 $297 $264 $271 $310
T-MOBILE USA
Reconciliation of Non-GAAP Financial Measures to GAAP Financial
Measures
(dollars in millions, except for CPGA and CCPU)
(unaudited)
The following schedule reflects the CCPU calculation and provides a
reconciliation of the cost of serving customers used for the CCPU
calculation to total network costs plus general and administrative
costs reported on our condensed consolidated statements of operations:
Q2 Q1 YE Q4 Q3 Q2
2006 2006 2005 2005 2005 2005
-------------------------------------------
Network costs $878 $849 $2,883 $749 $735 $718
General and
administrative 682 661 2,324 598 596 572
-------------------------------------------
Total network and
general and
administrative costs 1,560 1,510 5,207 1,347 1,331 1,290
Plus: Subsidy loss
unrelated to customer
acquisition 162 200 629 171 133 153
-------------------------------------------
Total cost of
serving customers $1,722 $1,710 $5,836 $1,518 $1,464 $1,443
===========================================
CCPU ($ / customer
per month) $24.96 $25.66 $25.23 $24.32 $24.65 $25.66
About T-Mobile USA:
Based in Bellevue, WA, T-Mobile USA, Inc. is a member of the
T-Mobile International group, the mobile telecommunications subsidiary
of Deutsche Telekom AG (NYSE: DT).
T-Mobile USA's GSM/GPRS 1900 voice and data network in the United
States reaches over 275 million people, including roaming and other
agreements. In addition, T-Mobile USA operates the largest
carrier-owned Wi-Fi (802.11b) wireless broadband (WLAN) network in the
United States, available in more than 7,800 public access locations
including Starbucks coffeehouses, Kinko's copy shops, Borders Books
and Music, Hyatt and Accor hotels, selected airports' American
Airlines Admirals Clubs, United Red Carpet Clubs, US Airways Clubs and
Delta Air Lines Clubs. T-Mobile USA is committed to providing the best
value in wireless service through its GET MORE promise to provide
customers with more minutes, more features and more service. For more
information, visit the company website at www.t-mobile.com.
About T-Mobile International:
T-Mobile International is one of the world's leading companies in
mobile communications. As one of Deutsche Telekom`s (NYSE: DT) three
strategic business units, T-Mobile concentrates on the key markets in
Europe and the United States.
By the end of the second quarter of 2006, more than 90 million
mobile customers were served by companies of the Deutsche Telekom
group, all over a common technology platform based on GSM, the world's
most widely used digital wireless standard. This also makes T-Mobile
the only mobile communications provider with a transatlantic service.
For more information about T-Mobile International, please visit
www.t-mobile.net. For further information on Deutsche Telekom, please
visit www.telekom.de/investor-relations.
