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MetroPCS Profit Misses Estimates as Subscriber Growth Slows

Nov. 1 (Bloomberg) -- MetroPCS Communications Inc., the pay-as-you-go U.S. wireless carrier, reported third-quarter profit that missed analysts’ estimates as subscriber growth slowed for the second consecutive quarter.

Net income fell 10 percent to $69 million, or 19 cents a share, from $77 million, or 22 cents, a year earlier, the Richardson, Texas-based company said today. Analysts had projected earnings of 23 cents a share, the average of estimates compiled by Bloomberg. Sales rose 18 percent to $1.2 billion, in line with estimates.

MetroPCS gained 69,000 customers, slowing from additions of 199,000 in the second quarter. Analysts predicted an increase of 53,500 clients, the average of six estimates showed. Churn, or the rate of monthly customer defections, rose to 4.5 percent from 3.9 percent in the second quarter as the company faced competition from larger rivals Sprint Nextel Corp. and Deutsche Telekom AG’s T-Mobile USA in the so-called no-contract market, which is growing as consumer seek cheaper phone service.

“We are inclined to sit on the sidelines,” Jonathan Chaplin, an analyst with Credit Suisse Group AG, said in research note. “Competition in the prepaid space escalates with AT&T and Verizon both launching $50 prepaid unlimited offers,” wrote Chaplin, who has a neutral rating on the stock.

MetroPCS fell 9.9 percent to $7.66 at the close in New York. It has lost 39 percent this year.

Leap Gains

Leap Wireless International Inc., the San Diego-based company that competes with MetroPCS in the pay-as-you-go market, jumped 11 percent to $7.71 after reporting stronger subscriber gains yesterday than analysts predicted. The company added 73,000 voice customers last quarter, exceeding the 30,000 that analysts on average projected, according to Sanford C. Bernstein & Co.

MetroPCS has emerged as the frontrunner to buy assets from AT&T Inc. and T-Mobile USA as those companies seek to complete their merger, people familiar with the matter said last month. AT&T is trying to sell assets to address regulatory concerns that a reduction in nationwide providers to three from four would undermine competition, after the U.S. Justice Department sued to block the merger in August.

Building a fourth-generation network with long-term evolution, or LTE, technology is a higher priority for MetroPCS than expanding the reach of the network to new markets, company executives said on an earnings call with analysts today.

“Building out a full nationwide network isn’t part of the game here,” Chief Operating Officer Tom Keys said.

To contact the reporter on this story: Scott Moritz in New York, at smoritz6@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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