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T-Mobile were coy about their financial performance when they revealed Q4 2007 subscriber stats back in January, but the figures are now in and it looks to have been a pretty successful year for the carrier.  Service revenues for the quarter grew by 14.6-percent over the same period last year, reaching $4.4bn, while customer churn fell from 2.1-percent to 1.8-percent.  Meanwhile, the carrier posted $1.33bn in Operating Income Before Depreciation and Amortization (OIBDA) for the quarter, up 13.2-percent on Q4 2006, giving a net income of $383 million; profit steadily dropped each quarter in 2007, however, for which T-Mobile are blaming "higher customer acquisition costs".

Blended average revenue per user (ARPU) remained steady at $52 in Q4 2007, the same as the previous year, despite a small rise to $53 in Q3 2007.  Of that, data revenue makes up 15.8-percent (or $8.20 per customer) driven, T-Mobile state, by increased messaging.  The total number of SMS and MMS messages rose to 24bn in Q4 2007.

The year also saw a significant outlay by the network, spending $500m in Q3 and $1.01bn in Q4; much of this was on increasing the carrier's UMTS coverage.

Press Release:

Bellevue, February 28th, 2008 -- T-Mobile USA, Inc. (T-Mobile USA) today reported fourth quarter and full year 2007 results.  At the end of the quarter, the company had 28.7 million customers, adding more than 951,000 net new customers during the fourth quarter, OIBDA of $1.33 billion, up 13.2% compared to the fourth quarter of 2006, and a reduction in contract customer churn to 1.8% from 2.1% in the fourth quarter of 2006.

“T-Mobile continues to drive strong year-over-year growth by pioneering innovation that matters to consumers,” said Robert Dotson, CEO and President, T-Mobile USA.  “In 2007, we increased growth to more than 3.6 million net new customers. myFavesSM was a major contributor, with 5 million customers at year-end using the service to enjoy truly affordable unlimited calling features along with one-touch access to their Faves. Our new FlexPaySM plans also debuted in 2007, driving smart financials and new growth by opening up access to more attractive offerings for a broader base of customers.  Finally, with the successful completion of our SunCom acquisition, we also look forward to bringing our services to new customers in both the Carolinas and in Puerto Rico.”

“T-Mobile USA continues to deliver very strong results,” said René Obermann, Chief Executive Officer, Deutsche Telekom.  “Year on year double digit growth in both service revenues and OIBDA show how T-Mobile USA is helping Deutsche Telekom deliver on its strategy to grow abroad with mobile.”

Customers

·         In the fourth quarter of 2007, T-Mobile USA added 951,000 net new customers, up from 857,000 in the third quarter of 2007, and 901,000 in the fourth quarter of 2006.

o    Contract customer net additions in the fourth quarter of 2007 made up 77% of customer growth, up from 65% in the third quarter of 2007, and down from 87% in the fourth quarter of 2006.

o    myFaves continues to be very popular with our customers. At the end of the fourth quarter there were 5.0 million myFaves customers, up from 3.5 million at the end of the third quarter.

·         Contract customers comprised 83% of T-Mobile USA’s total customer base at December 31, 2007.

Churn

·         Contract customer churn was 1.8% in the fourth quarter of 2007, down from 2.0% in the third quarter of 2007 and 2.1% in the fourth quarter of 2006. The year over year decline in churn is primarily due to the introduction of two-year contracts in the second quarter of 2006.

·         Blended churn, including both contract and prepaid customers, was 2.8% in the fourth quarter of 2007, down from 2.9% in both the third quarter of 2007 and the fourth quarter of 2006.

OIBDA and Net Income

·         T-Mobile USA reported OIBDA of $1.33 billion in the fourth quarter of 2007, down from $1.41 billion in the third quarter of 2007 and up from $1.17 billion in the fourth quarter of 2006.

o    The sequential decrease in OIBDA was primarily due to higher customer acquisition costs in the fourth quarter of 2007.

·         OIBDA margin was 30% in the fourth quarter of 2007, down from 32% in the third quarter of 2007, and the same as in the fourth quarter of 2006.

·         Net income for the fourth quarter of 2007 was $383 million, down from $526 million in the third quarter of 2007 and up from $179 million in the fourth quarter of 2006. 

Revenue 

·         Service revenues, consisting of contract, prepaid, and roaming and other service revenues, rose to $4.37 billion in the fourth quarter of 2007, up slightly from $4.33 billion in the third quarter of 2007, and up from $3.81 billion in the fourth quarter of 2006.

o    The increase in service revenues year on year was primarily due to the growth in contract customers.

·         Other revenues were $77 million in the fourth quarter of 2007, down from $82 million in the third quarter of 2007 and $122 million in the fourth quarter of 2006.

o    The major reason for the year on year fall in other revenues was the ongoing migration of AT font-size: 7pt; line-height: normal; font-style: normal; font-variant: normal">    In 2007, Wi-Fi revenues were reclassified to contract revenues and roaming and other service revenues (see note 9 to the Selected Data below for further explanation).

·         Total revenues, including service, equipment, and other revenues were $5.07 billion in the fourth quarter of 2007, up from $4.89 billion in the third quarter of 2007 and $4.52 billion in the fourth quarter of 2006.

ARPU

·         Blended Average Revenue Per User (“ARPU” as defined in note 1 to the Selected Data, below) was $52 in the fourth quarter of 2007, down from $53 in the third quarter of 2007 and the same as in the fourth quarter of 2006.

·         Contract ARPU was $56 in the fourth quarter of 2007, down from $57 in the third quarter of 2007, and the same as in the fourth quarter of 2006.

o    The sequential fall in contract ARPU was primarily due to lower variable revenues from contract customers.

·         Data services revenues were $690 million in the fourth quarter of 2007, representing 15.8% of blended ARPU, or $8.20 per customer, compared to 15.4% of blended ARPU, or $8.10 per customer in the third quarter of 2007, and 12.5% of blended ARPU, or $6.50 per customer in fourth quarter of 2006.

o    Growth in messaging revenue continued to be the most significant driver of data ARPU. The total number of SMS and MMS messages increased to almost 24 billion in the fourth quarter of 2007, compared to 21 billion in the third quarter of 2007 and almost 13 billion in the fourth quarter of 2006.

o    Strong GPRS / EDGE access and usage revenues were another significant driver of the increase in data services revenues in the fourth quarter of 2007 compared to the fourth quarter of 2006.

o    T-Mobile USA’s converged device offering was significantly strengthened during 2007 with the successful launch of a number of converged devices such as the T-Mobile ShadowTM, the T-Mobile Sidekick iDTM, LXTM, and SlideTM, T-Mobile WingTM, and the BlackBerry® CurveTM – the first converged device enabled for the new HotSpot @HomeSM service. The fourth quarter of 2007 saw a continued strong demand for these converged devices.

CPGA and CCPU

·         The average cost of acquiring a customer, Cost Per Gross Add (“CPGA” as defined in note 4 to the Selected Data, below) was $300 in the fourth quarter of 2007, up from $280 in the third quarter of 2007 and the same as in fourth quarter of 2006. 

o    The sequentially higher CPGA is primarily due to higher advertising and marketing costs during the fourth quarter holiday season.

·         The average cash cost of serving customers, Cash Cost Per User (“CCPU” as defined in note 3 to the Selected Data, below), was $25 per customer per month in the fourth quarter of 2007, down from $26 in the third quarter of 2007 and the same as in fourth quarter of 2006.

o    The primary reason for the decrease in CCPU in the fourth quarter of 2007 compared to the third quarter of 2007 was due to lower network costs. 

Capital Expenditures

·         Cash capital expenditures (see note 7 to the Selected Data below) were $1.01 billion in the fourth quarter of 2007, compared with $500 million in the third quarter of 2007 and $675 million in the fourth quarter of 2006.

o    The sequential and year on year increase in cash capital expenditures was due to an increase in network capital expenditures, including T-Mobile USA’s UMTS build-out. At the end of 2007, T-Mobile USA had deployed over 8,000 UMTS-capable cell sites.

·         T-Mobile USA continued its commitment to invest in network coverage and quality in the fourth quarter of 2007, adding almost 900 new cell sites, bringing the total number of cell sites at the end of the quarter to 37,900.

Other Highlights

·         For the seventh consecutive reporting period, according to the J.D. Power and Associates 2008 Wireless Customer Care Performance StudySM released on January 31, 2008, T-Mobile USA ranked highest among the five largest wireless carriers in customer service performance.

·         T-Mobile USA’s HotSpot @Home service continues to receive recognition in the industry. During the fourth quarter, HotSpot @Home received three awards for innovation: One of the 10 annual “New York Times” Pogie Awards, the wireless networking Annual Mobile Innovation Award from “Laptop” magazine, and the 2007 Product Differentiation Innovation Award from Frost & Sullivan, a market research firm.  “T-Mobile has dedicated themselves to providing a feature-rich and seamless end user experience,” stated Frost font-size: 7pt; line-height: normal; font-style: normal; font-variant: normal">         In February 2008 T-Mobile USA made the T-Mobile Hotspot @ Home Talk Forever Home Phone service available in selected markets (Dallas and Seattle). With the Talk Forever Home Phone, customers can connect their regular home phones to a dedicated T-Mobile Wi-Fi access point and pay a set price for unlimited calling to anyone, anytime.

·         T-Mobile USA announced the proposed acquisition of SunCom Wireless (SunCom) in September 2007, which closed on February 22, 2008. The acquisition further enhances T-Mobile USA’s network coverage in the southeastern United States and the Caribbean. SunCom has operated a GSM/GPRS/EDGE network and provided roaming service to T-Mobile USA in these markets since 2004.

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 Deutsche Telekom AG’s (NYSE: DT) Mobile Communications Business, and is a wholly owned subsidiary of T-Mobile International. In order to provide comparability with the results of other US 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).