T-Mobile US Inc. (TMUS), the fourth-largest U.S wireless carrier, added contract customers for the first time in three years, reaching a key milestone in its turnaround plan, according to two people with knowledge of the situation.
The subscriber gains will be reflected in the company’s latest quarterly results, said the people, who asked not to be identified because the data isn’t yet public. T-Mobile, controlled by Deutsche Telekom AG (DTE), is planning a press event in New York today to outline its progress since completing a merger with MetroPCS Communications Inc. in May.
The return to user growth comes six months ahead of schedule and validates the strategy of Chief Executive Officer and firebrand John Legere, who recast the company as an “un-carrier” last September to distinguish it from Verizon Wireless and AT&T Inc. (T) He began selling smartphones on installment plans -- breaking from the industry tradition of subsidizing purchases -- while upgrading to a faster long-term evolution network and adding Apple Inc. (AAPL)’s iPhone to T-Mobile’s lineup.
At the end of March, the company had about 20.1 million customers T-Mobile-branded contract subscribers and 6 million pay-as-you-go users. The last time T-Mobile added contract subscribers was in the second quarter of 2010. T-Mobile will mark the occasion at today’s event with appearances by celebrity chef Ludo Lefebvre and DJ Harley Viera-Newton.
After losing 2.1 million T-Mobile-branded contract subscribers last year, the company is trying to rebuild its customer base with higher-paying users, helping it return to sales and profit growth. Any signs of improving performance may also persuade Deutsche Telekom to hold onto the asset longer, according to people close to the German phone company. Deutsche Telekom Chief Financial Officer Timotheus Hoettges discussed the idea of selling T-Mobile at a shareholder meeting in May.
Anne Marshall, a spokeswoman for Bellevue, Washington-based T-Mobile US, and Andreas Fuchs, a spokesman for Deutsche Telekom in Bonn, declined to comment on second-quarter subscriber figures. Deutsche Telekom and T-Mobile are both scheduled to release earnings on Aug. 8.
T-Mobile, which is 74 percent owned by Deutsche Telekom, debuted on the New York Stock Exchange on May 1. The stock has gained almost 50 percent since then, while shares of Verizon Communications Inc. (VZ) and AT&T have fallen.
The shares rose as much as 5.9 percent yesterday after Bloomberg News reported the subscriber gains, and closed 3.3 percent higher at $24.09 in New York. Deutsche Telekom added 0.2 percent to 8.93 euros at 9:10 a.m. in Frankfurt today.
While the MetroPCS agreement prevents Deutsche Telekom from selling the shares on the stock market for 18 months, the German carrier has said it can choose to divest the business to a third party before that lockup period expires.
“It looks like the turnaround is making progress,” said Heike Pauls, an analyst at Commerzbank AG in Frankfurt who has a hold rating on Deutsche Telekom shares. “It gives them time to hold out and not necessarily jump on the first offer that comes their way.”
Dish Network Corp. (DISH), which lost out in bidding wars for Sprint and Clearwire Corp. (CLWR), contacted Deutsche Telekom executives earlier this year to explore a potential takeover of T-Mobile, people familiar with the matter said in April. SoftBank Corp. (9984), a Japanese carrier, is slated to close its acquisition of Sprint today.
T-Mobile’s subscriber turnaround has been helped by promotions around the iPhone. The carrier debuted the iPhone in April, offering it for $99 upfront followed by 24 months of $20 payments. Other carriers sell the iPhone for $199 with a two-year contract.