MetroPCS Falls After Subscriber Additions Dwindle

MetroPCS Communications Inc., (PCS) the pay-as-you-go mobile carrier, fell 9.2 percent in U.S. trading after adding fewer customers than analysts estimated. The company also said it’s not interested in buying Leap Wireless International Inc. (LEAP)

MetroPCS added 66,000 total customers in the third quarter, according to a statement from the Dallas-based company today. That compares with estimates of 157,000 from Mike McCormack, an analyst at J.P. Morgan Securities Inc., and 124,000 from Robert Dezego, an analyst at SunTrust Robinson Humphrey.

The net additions were lower than MetroPCS forecast. The economic slump and heightened competition drove up customer turnover and made it more difficult to gain subscribers, Chief Executive Officer Roger Linquist said in the statement. Higher prices for some phones also may have put off customers, he said.

“They have a tough road ahead of them,” said Michael Nelson, a New York-based analyst at Soleil/Nelson Alpha Research Inc. He advises investors to hold the shares and doesn’t own any. “They’re going to have an increasingly more difficult time gaining share in the hypercompetitive market that they’re currently in.”

On a conference call with analysts today, Linquist said the company isn’t interested in pursuing a merger with Leap and will instead focus on expanding its footprint through roaming partnerships. Merger talks between the two companies fell apart two years ago. San Diego, California-based Leap fell 6.5 percent on the Nasdaq.

MetroPCS declined 61 cents to $6.01 at 4 p.m. in New York Stock Exchange composite trading, the most in a month. The stock has dropped 60 percent this year.

Subscriber Forecast

The carrier lost 54,000 customers in older markets. MetroPCS lowered its forecast for subscriber additions in 2009, blaming the economy and intensifying competition. The company now expects to add as many as 1.2 million customers this year, down from a previous estimate of as many as 1.7 million.

Sprint Nextel Corp. (S)’s Boost Unlimited brand is offering a nationwide, contract-free, unlimited plan, and America Movil SAB’s (AMXL) Tracfone Wireless Inc. has teamed with Verizon Wireless and Wal-Mart Stores Inc. to improve coverage and expand distribution.

MetroPCS has become more aggressive in courting customers amid stiffer competition from larger competitors, expanding into New York and Boston earlier this year. Promotions in the fourth quarter will likely lower customers’ monthly bills in the future, the company said today on a conference call.

Net Income

Earnings, before interest, taxes, depreciation and amortization, will be $850 million to $950 million in 2009, MetroPCS said. Analysts in a Bloomberg survey had predicted $897.9 million. The company previously had forecast Ebitda as high as $1.1 billion.

Net income rose to $73.6 million, or 21 cents a share, from $44.9 million, or 13 cents, a year earlier, the company said today in a statement. That beat the 10-cent average of estimates compiled by Bloomberg.

Sales rose 30 percent, to $895.6 million. That compared with analysts’ average estimate of $866.6 million.

Average revenue per user rose 35 cents to $41.08 a month from a year earlier after the company introduced an unlimited international calling plan in June and added features to its $40 and $45 plans. Monthly bills had declined in the four previous quarters.

Leap Wireless, which also sells pay-as-you-go mobile phone and Internet service, added 116,000 net new subscribers including broadband customers. Like MetroPCS, San Diego-based Leap lost customers in older markets, subtracting 83,000 in the period.

Leap’s third-quarter net loss widened to $65.4 million, or 85 cents a share, from $47.3 million, or 72 cents, a year earlier. That missed the 46-cent average estimate from analysts surveyed by Bloomberg. Revenue increased 21 percent to $599.5 million. Analysts had predicted $617.3 million.

(Leap Wireless will hold a call to discuss results at 5 p.m. New York time at http://investor.leapwireless.com. For a replay of MetroPCS’s call go to http://investor.metropcs.com.)

To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net

To contact the editor responsible for this story: Julie Alnwick at jalnwick@bloomberg.net

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