BELLEVUE, Wash.---T-Mobile USA (NYSE:DT - News):
- 802,000 total net new customers. 773,000 net new postpay
customers, up from 507,000 in the second quarter of 2006 and
716,000 in the third quarter of 2005
- Strong postpay ARPU of $56, up from $55 in the second quarter
of 2006 and the third quarter of 2005
- 1.4 million postpay converged device users (BlackBerry and
Sidekick), a net increase of 172,000 users in the third
quarter of 2006. Sidekick 3 and BlackBerry Pearl launched in
the quarter
- T-Mobile USA more than doubles spectrum in top 100 markets as
a result of the high bids achieved in the Advanced Wireless
Services (AWS) Auction
- $3.7 billion in service revenues in the third quarter of 2006,
up 18% from the third quarter of 2005
- $1.23 billion in Operating Income Before Depreciation and
Amortization (OIBDA) in the quarter
In the third quarter of 2006 T-Mobile USA, Inc (T-Mobile USA)
added 802,000 net new customers, up from 613,000 net new customers
added in the second quarter of 2006 and down from 1.06 million in the
third quarter of 2005. Postpay customer additions were strong making
up 96% of third quarter customer growth, up from 83% in the second
quarter of 2006. Postpay customers comprised 85% of T-Mobile USA's
total customer base at September 30, 2006. Furthermore, the
introduction of two-year contracts during the second quarter continued
to prove popular with customers, with close to 80% of new postpay
customers opting for two-year contract terms in the third quarter.
Postpay churn declined to 2.3% in the third quarter of 2006 from
2.4% in the third quarter of 2005 and rose slightly from 2.2% in the
second quarter of 2006 in line with prior year trends. Prepaid churn
was 6.9% in the third quarter of 2006, up from the 6.6% in the second
quarter of 2006 and the third quarter of 2005. Blended churn,
including both postpay and prepaid customers, was 3.0% in the third
quarter of 2006, up from 2.9% in the second quarter of 2006 and the
third quarter of 2005. The increase in blended churn compared to the
third quarter of 2005 was due to the higher proportion of prepaid
customers in the total customer base.
"We've made several transformational moves this year that
significantly increase our strength in the marketplace," said Robert
Dotson, President and CEO, T-Mobile USA. "In October, we unveiled a
bold new brand position in 'Stick Together.' We also launched an
exciting new customer experience in 'myFaves' that introduces a
breakthrough people-centered user interface across the majority of our
handset lineup. We capped things off with a very successful outcome in
the 2006 AWS auction, more than doubling our spectrum holdings in the
top 100 markets at favorable prices compared to previous spectrum
auctions. And through it all, we've continued to deliver steady and
profitable growth."
Rene Obermann, CEO of T-Mobile International and member of the
Board of Management of Deutsche Telekom AG remarked: "T-Mobile USA
continues to be Deutsche Telekom's key growth driver. The additional
investments we've made in the AWS auction were essential to continue
the profitable growth of T-Mobile USA for years to come. Also, we're
importing T-Mobile USA's service models into our European operations
because of their outstanding customer service, as recognized by
numerous awards."
T-Mobile USA reported OIBDA of $1.23 billion in the third quarter
of 2006, up from $1.21 billion in the second quarter of 2006 and $1.17
billion in the third quarter of 2005. The growth in OIBDA occurred
despite higher total customer acquisition costs related to the strong
postpay growth and the expected continued decrease in Cingular
Wireless LLC ("Cingular") wholesale revenues.
T-Mobile USA's net income for the third quarter of 2006 was $1.79
billion, up from $233 million in the second quarter of 2006 and $458
million in the third quarter of 2005. The increase in net income is
primarily due to the realization of a $1.5 billion non-cash income tax
benefit. In the third quarter of 2006 T-Mobile USA determined, based
on the weight of available evidence, that it was more likely than not
that most of its deferred tax assets would be realized. Accordingly
$1.5 billion of the total remaining valuation allowance of $1.8
billion was released during the quarter.
T-Mobile USA service revenues, consisting of postpay, prepaid,
roaming and other service revenues rose to $3.72 billion in the third
quarter of 2006, up from $3.59 billion in the second quarter of 2006
and $3.15 billion in the third quarter of 2005. The increases are
primarily due to growth in the number of customers, supported by
strong postpay ARPU ("Average Revenue Per User" as defined in note 1
to the Selected Data, below) performance. Other revenues were $147
million in the third quarter of 2006, down from $177 million in the
second quarter of 2006 and $235 million in the third 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. The sequential and year
on year decrease in other revenues reflects the ongoing migration of
Cingular's customers to its network following the dissolution of our
network sharing venture in early 2005. Total revenues, including
service, equipment, and other revenues were $4.37 billion in the third
quarter of 2006, up from $4.21 billion in the second quarter of 2006
and $3.80 billion in the third quarter of 2005.
ARPU was $52 in the third quarter of 2006, unchanged from the
second quarter of 2006 and down from $53 in the third quarter of 2005.
Postpay ARPU was $56 in the third quarter of 2006, up from $55 in the
second quarter of 2006 and the third quarter of 2005. The sequential
increase in postpay ARPU related primarily to continued data revenue
growth. The fall in blended ARPU year on year is primarily due to the
higher proportion of prepaid customers in the customer base in 2006.
Data services revenue (which excludes Wi-Fi revenues) from postpay
and prepaid customers continued to grow, reaching a total of $421
million in the third quarter of 2006. Data revenues, which are a
component of service revenues, represented 11.3% of blended ARPU, or
$5.91 per customer, in the third quarter of 2006, compared to 10.9%,
or $5.65, in the second quarter of 2006 and 8.3% or $4.39, in the
third quarter of 2005. T-Mobile USA's data device offering was further
strengthened during the quarter with the successful launch of the
Sidekick 3 in July and BlackBerry Pearl in September. The number of
postpay converged device users (both BlackBerry and Sidekick) rose to
almost 1.4 million by the end of the quarter, a net increase of
172,000 users in the quarter. Strong growth in messaging continued to
contribute to the increase in data ARPU. The total number of SMS and
MMS messages increased to 9.9 billion in the third quarter of 2006,
compared to 7.9 billion in the second quarter of 2006 and 4.6 billion
in the third quarter of 2005.
The average cost of acquiring a customer, Cost Per Gross Add
("CPGA", as defined in note 3 to the Selected Data, below) was $299 in
the third quarter of 2006, down from $322 in the second quarter of
2006 and up from $271 in the third quarter of 2005. Compared to the
second quarter of 2006 the fall in CPGA is primarily due to lower
advertising costs and higher gross customer additions.
The average cash cost of serving customers, Cash Cost Per User
("CCPU", as defined in note 2 to the Selected Data, below), was $24.83
per customer per month in the third quarter of 2006, similar to $24.96
in the second quarter of 2006 and $24.65 in the third quarter of 2005.
The slight sequential fall in CCPU in the third quarter was primarily
due to relatively lower general and administrative expenses being
partially offset by relatively higher network costs.
Capital expenditures were $569 million in the third quarter of
2006, compared with $593 million in the second quarter of 2006 and
$585 million in the third quarter of 2005. As part of its ongoing
commitment to network coverage and quality, T-Mobile USA added
approximately 800 new cell sites in the third quarter of 2006,
bringing the total number of cell sites to almost 35,300.
For the fourth consecutive reporting period, T-Mobile USA was the
only wireless carrier to rank highest in overall customer satisfaction
among wireless telephone users in all of the six regions surveyed by
J.D. Power and Associates. This survey result continues the successful
run of winning awards - in October T-Mobile received the highest
ranking in the J.D. Power and Associates Wireless Retail Sales
Satisfaction Performance Study, also for the fourth consecutive
reporting period. And earlier this year, J.D. Power and Associates
announced that T-Mobile ranked highest in Wireless Customer Care for
the fourth reporting period in a row.
The third quarter saw the conclusion of the Advanced Wireless
Services (AWS) auction. The auction ended with T-Mobile USA being the
high bidder on 120 licenses for an aggregate value of approximately
$4.18 billion. As of September 30, 2006, T-Mobile USA had paid
approximately $0.6 billion in deposits for these licenses. These
deposits are not included in third-quarter capital expenditures but
were recorded as "Payments in advance to acquire spectrum licenses" in
the consolidated statement of cash flows. Following the end of the
quarter, T-Mobile USA paid the remaining $3.6 billion to the FCC for
the licenses on which it was the high bidder. The actual license grant
will occur after the FCC application review. We currently expect these
licenses to be granted late in the fourth quarter of 2006 or in early
2007.
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 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 - News). 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) Q3 06 Q2 06 Q1 06 YE 05 Q4 05 Q3 05
----------------------------------------------------------------------
Covered population 239,000 238,000 234,000 233,000 233,000 232,000
----------------------------------------------------------------------
Customers, end of
period 24,139 23,338 22,725 21,690 21,690 20,302
----------------------------------------------------------------------
Thereof postpay
customers 20,428 19,656 19,149 18,424 18,424 17,512
----------------------------------------------------------------------
Thereof prepaid
customers 3,711 3,682 3,576 3,266 3,266 2,790
----------------------------------------------------------------------
Net customer additions 802 613 1,035 4,376 1,388 1,059
----------------------------------------------------------------------
----------------------------------------------------------------------
Minutes of use/post
pay customer/month 1,049 1,041 1,013 963 985 985
----------------------------------------------------------------------
Postpay churn 2.3% 2.2% 2.1% 2.3% 2.3% 2.4%
----------------------------------------------------------------------
Prepaid churn 6.9% 6.6% 5.8% 6.6% 6.6% 6.6%
----------------------------------------------------------------------
Blended churn 3.0% 2.9% 2.7% 2.9% 2.9% 2.9%
----------------------------------------------------------------------
($ / month)
----------------------------------------------------------------------
ARPU (blended)(1) 52 52 51 53 52 53
----------------------------------------------------------------------
ARPU (postpay) 56 55 54 55 54 55
----------------------------------------------------------------------
ARPU (prepaid) 22 22 22 25 24 24
----------------------------------------------------------------------
Cost of serving
(CCPU)(2) 24.83 24.96 25.66 25.23 24.32 24.65
----------------------------------------------------------------------
Cost per gross add
(CPGA)(3) 299 322 275 297 264 271
----------------------------------------------------------------------
($ million)
----------------------------------------------------------------------
Total revenues 4,367 4,209 4,039 14,806 3,953 3,802
----------------------------------------------------------------------
Service revenues(1) 3,723 3,586 3,389 12,308 3,261 3,153
----------------------------------------------------------------------
OIBDA(4) 1,227 1,210 1,103 4,185 1,112 1,166
----------------------------------------------------------------------
OIBDA margin (5) 32% 32% 31% 32% 32% 34%
----------------------------------------------------------------------
Capital expenditures 569 593 770 5,045 807 585
----------------------------------------------------------------------
Cell sites on-air 35,300 34,500 33,600 32,900 32,900 31,800
----------------------------------------------------------------------
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)
September 30, December 31,
2006 2005
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents................ $ 57 $ 57
Accounts receivable, net of allowance for
doubtful accounts of $167 and $151,
respectively............................ 2,249 2,116
Accounts receivable from affiliates...... 1,011 188
Inventory................................ 551 409
Current portion of net deferred tax
assets.................................. 792 275
Other current assets..................... 503 437
------------- -------------
Total current assets................. 5,163 3,482
------------- -------------
Property and equipment, net of accumulated
depreciation of $6,911 and $5,134,
respectively.............................. 10,743 10,805
Goodwill................................... 10,701 10,701
Spectrum licenses.......................... 11,487 11,510
Other intangible assets, net of accumulated
amortization of $401 and $282,
respectively.............................. 121 241
Payments in advance to acquire spectrum
licenses.................................. 584 -
Other assets and investments............... 177 253
------------- -------------
$ 38,976 $ 36,992
============= =============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable......................... $ 1,469 $ 1,665
Payables to affiliates................... 861 53
Accrued liabilities...................... 2,330 1,082
Deferred revenue......................... 359 373
------------- -------------
Total current liabilities............ 5,019 3,173
------------- -------------
Long-term payables to affiliates........... 5,741 6,457
Deferred income tax liabilities............ 482 906
Other long-term liabilities................ 698 1,697
------------- -------------
Total long-term liabilities.......... 6,921 9,060
------------- -------------
Voting preferred stock held by parent
company................................... 5,000 5,000
Minority interest in equity of consolidated
subsidiaries.............................. 79 65
Commitments and contingencies
Shareholder's equity:
Common stock............................. 39,455 39,452
Accumulated deficit...................... (17,498) (19,758)
------------- -------------
Total shareholder's equity........... 21,957 19,694
------------- -------------
$ 38,976 $ 36,992
============= =============
T-MOBILE USA
Condensed Consolidated Statements of Operations
(dollars in millions)
(unaudited)
Quarter Quarter Quarter
Ended Ended Ended
September June 30, September
30, 2006 2006 30, 2005
------------------------------
Revenues:
Postpay............................... $ 3,352 $3,218 $2,832
Prepaid............................... 240 241 182
Roaming and other services............ 131 127 139
Equipment sales....................... 497 446 414
Other................................. 147 177 235
------------------------------
Total revenues..................... 4,367 4,209 3,802
------------------------------
Operating expenses:
Network............................... 940 878 735
Cost of equipment sales............... 758 702 648
General and administrative............ 667 682 596
Customer acquisition.................. 775 737 657
Depreciation and amortization......... 654 651 558
------------------------------
Total operating expenses........... 3,794 3,650 3,194
------------------------------
Operating income........................ 573 559 608
Other income (expense):
Interest expense...................... (105) (134) (112)
Interest income and other, net........ 74 12 6
------------------------------
Total other income (expense).......... (31) (122) (106)
------------------------------
Income before income taxes.............. 542 437 502
Income tax benefit/(expense)............ 1,244 (204) (44)
------------------------------
Net income.............................. $ 1,786 $ 233 $ 458
==============================
T-MOBILE USA
Condensed Consolidated Statements of Cash Flows
(dollars in millions)
(unaudited)
Quarter Quarter
Ended Ended
September September
30, 2006 30, 2005
---------- ----------
Operating activities:
Net income................................... $ 1,786 $ 458
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.......... 654 558
Income tax (benefit)/expense........... (1,244) 44
Other, net............................. (35) (31)
Changes in operating assets and
liabilities:
Accounts receivable............... (162) (35)
Inventory......................... (6) (98)
Other current assets.............. 9 56
Accounts payable.................. 44 12
Accrued liabilities............... 64 98
---------- ----------
Net cash provided by operating activities. 1,110 1,062
---------- ----------
Investing activities:
Purchases of property and equipment.......... (569) (585)
Payments in advance to acquire spectrum
licenses.................................... (584) -
Short term loan to affiliate................. 50 -
---------- ----------
Net cash used in investing activities..... (1,103) (585)
---------- ----------
Financing activities:
Long-term debt repayments to affiliates...... - (500)
Change in minority interest.................. - 22
---------- ----------
Net cash used in financing activities..... - (478)
---------- ----------
Change in cash and cash equivalents.............. 7 (1)
Cash and cash equivalents, beginning of period... 50 204
---------- ----------
Cash and cash equivalents, end of period......... $ 57 $ 203
========== ==========
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:
Q3 2006 Q2 Q1 YE Q4 2005 Q3 2005
2006 2006 2005
------- ------- ------- ------- ------- -------
OIBDA $1,227 $1,210 $1,103 $4,185 $1,112 $1,166
Depreciation and
amortization (654) (651) (594) (2,229) (567) (558)
------- ------- ------- ------- ------- -------
Operating income $573 $559 $509 $1,956 $545 $608
======= ======= ======= ======= ======= =======
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:
Q3 Q2 2006 Q1 YE 2005 Q4 2005 Q3
2006 2006 2005
------ ------- ------- ------- ------- -------
Customer acquisition
costs $775 $737 $689 $2,792 $756 $657
Plus: Subsidy loss
Equipment sales (497) (446) (452) (1,529) (479) (414)
Cost of equipment
sales 758 702 737 2,622 738 648
------ ------- ------- ------- ------- -------
Total subsidy loss 261 256 285 1,093 259 234
------ ------- ------- ------- ------- -------
Less: Subsidy loss
unrelated to customer
acquisition (160) (162) (200) (629) (171) (133)
------ ------- ------- ------- ------- -------
Subsidy loss related
to customer
acquisition 101 94 85 464 88 101
------ ------- ------- ------- ------- -------
Cost of acquiring
customers $876 $831 $774 $3,256 $844 $758
====== ======= ======= ======= ======= =======
CPGA ($ / new
customer added) $299 $322 $275 $297 $264 $271
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:
Q3 2006 Q2 Q1 YE 2005 Q4 2005 Q3 2005
2006 2006
------- ------- ------- ------- ------- -------
Network costs $940 $878 $849 $2,883 $749 $735
General and
administrative 667 682 661 2,324 598 596
------- ------- ------- ------- ------- -------
Total network and
general and
administrative costs 1,607 1,560 1,510 5,207 1,347 1,331
Plus: Subsidy loss
unrelated to customer
acquisition 160 162 200 629 171 133
------- ------- ------- ------- ------- -------
Total cost of serving
customers $1,767 $1,722 $1,710 $5,836 $1,518 $1,464
======= ======= ======= ======= ======= =======
CCPU ($ / customer
per month) $24.83 $24.96 $25.66 $25.23 $24.32 $24.65
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 - News).
T-Mobile USA's GSM/GPRS 1900 voice and data network in the United
States reaches over 276 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 8,000 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's innovative wireless products and
services help empower people to connect effortlessly to those who
matter most. Multiple independent research studies continue to rank
T-Mobile highest, in numerous regions throughout the U.S., in wireless
call quality and wireless customer care. 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 AG's (NYSE: DT - News)
three strategic business units, T-Mobile concentrates on the key
markets in Europe and the United States.
By the end of the third quarter of 2006, almost 92 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.
