T-Mobile’s discounted plans lure in subscriber

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T-Mobile US Inc said added a record number of first quarter, blowing past its competitors as company’s aggressive discounts lured subscribers

T-Mobile shares jumped 7.3 percent as company that has billed itself as “uncarrier” signed 2.4 million first quarter, topping estimates of 932,000. That was more than its top three rivals combined, a first for No. 4 mobile carrier in United States based subscribers.

No. 3 carrier Sprint Corp is currently meeting with banks to work funding for a bid for T-Mobile, a source familiar with the situation said, as the mobile carrier works to ease regulatory concerns that the deal would hurt competition.

.S. authorities rejected a 2011 merger between AT&T and T-Mobile grounds that the market needs at least four major to be competitive

“Certainly is turning that the fact that the FCC had the foresight to enable us to continue to compete and not combine with other duopolists has been a good thing,” said Mike Sievert, chief marketing officer at T-Mobile.

“Consolidation if done right and if allows T-Mobile a charged ability to be a disruptive competitor, improving the wireless industry for consumers, we would be interested,” he said.

The company will rely free cash flow and debt to finance the upcoming spectrum auctions and does not plan diluting shares, he said.

T-Mobile, two-thirds owned by Deutsche Telekom AG, started to turn the corner last year after losing for four years, through aggressive marketing and heavy advertising for its wireless plans that have enabled it to grab market share.

The company launched a series of promotions this year, including eliminating contracts and introducing a billing plan for equipment that allows customers to pay for devices in installments. Analysts said the installment plans could pose a liability for the company if the economy turns sour as some customers may not be able to complete payments.

“The ‘uncarrier’ strategy is working a subscriber perspective and the market is responding to that,” said Michael McCormack, an analyst at Jefferies.

Still, the mobile service provider lost $151 million, or 19 cents per share, in the quarter, compared with a profit of $107 million, or 20 cents per share, a year earlier.

rose 47 percent to $6.88 billion, compared with $4.68 billion in the year-ago quarter.

Analysts, on average, expected a loss of 19 cents per share on of $6.92 billion.

It said earnings before interest, taxes, depreciation and amortization, or cash flow, fell 12.2 percent the previous quarter to $1.1 billion due to additional costs the sudden rise in subscribers.

But the company’s chief financial officer said T-Mobile is attracting higher quality customers that are migrating other carriers and have a better credit profile.

“The significant improvement towards prime customers helps inoculate us for any downturns that could happen in the future,” Chief Financial Officer Braxton Carter said.

In the quarter T-Mobile added 1.3 million postpaid customers — those who pay monthly bills — and 465,000 prepaid customers, who pay for calls in advance. (Reuters)