T-Mobile Losses Mount as No. 4 Carrier Pushes Customer Gains

T-Mobile US Inc., the fourth-largest U.S. wireless carrier, reported a net loss for a third consecutive quarter as subscriber gains, driven by its cheaper service plans, resulted in higher costs.

The net loss for the fourth quarter totaled $20 million, the Bellevue, Washington-based company said today in a filing. Leaving out interest expenses of $234 million, along with taxes, depreciation and amortization, profit would have grown 18 percent to $1.24 billion.

T-Mobile is working to lure customers by challenging the industry’s use of long-term contracts, discounted phones and international roaming rates. Last month, the company started offering as much as $450 to people who switch service from rivals such as AT&T Inc. T-Mobile, which merged with MetroPCS last year, added 869,000 monthly customers last quarter, topping the 791,000 average of analysts’ estimates.

“T-Mobile is making money on each subscriber they acquire -- it’s just nowhere near as much money as the incumbents are used to,” Craig Moffett, an analyst at MoffettNathanson LLC in New York, said in an e-mail. He recommends buying the shares. “The rest of the industry should be very afraid.”

T-Mobile fell 5.7 percent to $30.47 at the close in New York. The shares have declined 9.4 percent this year.

For all of 2013, T-Mobile had net income of $35 million. The company posted a third-quarter loss of $36 million and a second-quarter loss of $16 million.

AT&T struck back with price cuts of its own today, saying in a statement it would drop the cost of calls to the rest of North America and give customers on its Mobile Share plans unlimited international text messages for free.

Lower Bills

While customer additions have increased, the average bill size has shrunk. T-Mobile’s average phone bill for monthly subscribers decreased about 2.9 percent to $50.70 from $52.20 in the third quarter. Analysts had projected $51.06, according to a survey of eight analysts by Bloomberg.

Declines in revenue per customer should begin to stabilize in the second half of this year, Chief Financial Officer Braxton Carter said today on a conference call.

T-Mobile forecast 2014 adjusted earnings before interest, taxes, depreciation and amortization of $5.7 billion to $6 billion. That compares with the $5.99 billion estimated by analysts on average, according to data compiled by Bloomberg.

The company expects its promotions to draw significant demand from subscribers in the first quarter, putting pressure on profit margins that should subside later in the year, Carter said.

“Our business is a business that has acquisition costs of customers,” Carter said in a phone interview today. “If we had not grown during 2013 you would have seen a massive increase in the profitability, in the Ebitda and the net income of our business.”

Fourth-quarter sales rose 39 percent to $6.83 billion, missing the $6.94 billion average of analysts’ estimates compiled by Bloomberg.

(For information on T-Mobile’s conference call today, click here.)