10-QPeriod: Q3 FY2010

T-Mobile US, Inc. Quarterly Report for Q3 Ended Sep 30, 2010

Filed November 5, 2010For Securities:TMUSTMUSZTMUSITMUSL

Summary

MetroPCS Communications, Inc. (now T-Mobile US, Inc.) reported a solid third quarter ending September 30, 2010, demonstrating strong revenue growth and improved operational efficiency. Total revenues increased by 14% year-over-year, driven by a significant 16% rise in service revenues, fueled by a 1.5 million net customer addition over the preceding twelve months. This growth reflects the successful adoption of its 'Wireless for All' plans and a 27% increase in net customer additions year-to-date. The company also showed improved profitability, with income from operations increasing by 31% compared to the prior year's third quarter. This was supported by disciplined cost management, despite increased investments in network infrastructure, including the rollout of 4G LTE services. While a loss on debt extinguishment was noted, overall net income saw a modest 5% increase, indicating a resilient business model. The balance sheet remains robust, with substantial cash, cash equivalents, and short-term investments providing ample liquidity for ongoing operations and strategic investments.

Financial Highlights

51 data points
Beta

Revenue

$1.02B

44.2% Gross Margin

Net Income

$77.29M

7.6% Net Margin

EPS (Diluted)

$0.44

Total Assets

$8.32B

Cash & Equivalents

$889.78M

Free Cash Flow

$109.33M

Financial Statements
Beta
Revenue$1.02B
Cost of Revenue$569.95M
Gross Profit$450.84M
SG&A Expenses$147.43M
Operating Expenses$812.86M
Operating Income$207.93M
Interest Expense$65.73M
Net Income$77.29M
EPS (Basic)$0.44
EPS (Diluted)$0.44
Shares Outstanding (Basic)176.98M
Shares Outstanding (Diluted)178.21M

Key Highlights

  • 1Total revenues grew by 14% to $1.02 billion for the third quarter of 2010, compared to $895.6 million in the prior year's quarter.
  • 2Service revenues increased by 16% to $942.3 million, primarily driven by a net addition of 1.5 million customers in the twelve months ending September 30, 2010.
  • 3Income from operations surged by 31% to $207.9 million, indicating improved operational efficiency and cost management.
  • 4Net income for the quarter was $77.3 million, a 5% increase year-over-year, despite a $15.6 million loss on extinguishment of debt.
  • 5Total customers reached 7.86 million by the end of the quarter, up 24% year-over-year.
  • 6Average monthly churn rate decreased to 3.8% from 5.8% in the prior year's quarter, reflecting customer plan adoption and reduced 'false churn'.
  • 7The company maintained a strong liquidity position with $1.9 billion in cash, cash equivalents, and short-term investments as of September 30, 2010.

Frequently Asked Questions

Revenue growth was primarily driven by an increase in service revenues, which rose 16% year-over-year. This was largely due to a substantial increase in net customer additions, totaling 1.5 million over the preceding twelve months. The company also noted the positive impact of its new 'Wireless for All' tax and regulatory fee inclusive service plans on customer acquisition and retention.

MetroPCS demonstrated effective cost management. While cost of equipment increased due to higher upgrade handset costs, cost of service and selling, general and administrative expenses saw more moderate increases of 5% and 6% respectively, outpacing revenue growth. Depreciation and amortization also increased as the company invested in network infrastructure, including for 4G LTE. The company managed to grow income from operations by 31% year-over-year, indicating efficient cost control relative to revenue gains.

The company ended the quarter with a strong liquidity position, holding $1.9 billion in cash, cash equivalents, and short-term investments. Management believes this, along with anticipated cash flows from operations, is sufficient to fund planned operations and capital expenditures. The company is making significant capital investments in network expansion and 4G LTE deployment, indicating a focus on future growth.

Yes, a loss on extinguishment of debt of $15.6 million was recorded in the third quarter of 2010, related to the redemption of a portion of its 9 1/4% Senior Notes. Additionally, the provision for income taxes saw a significant increase of 244% compared to the prior year's quarter, impacting overall net income growth. Despite these items, net income still managed a 5% increase.