T-Mobile says being an "un-carrier" is starting to pay off, but its new strategy had the carrier hemorrhaging money during its fourth quarter.
The company reported that its Simple Choice program designed to pull customers away from the competition by eliminating annual service contracts and JUMP!, which allows for more frequent phone upgrades, has helped add subscribers, but at a cost. The plan has T-Mobile paying up to $350 per line to cover inactivation fees incurred by customers who break their contracts with a rival carrier.
T-Mobile posted a net loss of $20 million for the quarter, ended Dec. 31, up from $8 million during the same period in 2012. Revenue for the quarter was $6.8 billion, a 39 percent increase, which T-Mobile attributed to the company's acquisition of PCS Metro.
Capital expenditures tied to customer acquisition, system modernization and continued 4G LTE deployment were pegged at $4.2 billion for the year. For 2014, this figure is expected to grow to $4.3 to $4.6 billion.
T-Mobile reported it gained 1.6 million total net customers in the fourth quarter, a 15 percent increase over the same period last year. For the year total net customer additions totaled 4.4 million. This resulted in a 1.7 percent customer churn rate for both the year and the quarter. The cost of acquiring these new customers rose 40 percent. At the end of 2013, T-Mobile had 46.7 million customers on its books, the company said.
According to CNET, T-Mobile's subscriber growth comes in large part due to the company's new UnCarrier strategy, which has resulted in T-Mobile getting rid of service contracts and phone subsidies, adding a new upgrade program, offering free international data roaming, and giving away 200MB of free data for tablet customers. Earlier this year, the company announced it would pay early termination fees for customers switching to T-Mobile from any of the other three major US wireless operators.
Looking ahead the company expects its new subscriber models to add between 2 and 3 million people to its rolls in 2014.
"Our performance in the fourth quarter and the full year is clearly proving that we have our strategy right and that we are executing it well," said John Legere, President and CEO of T-Mobile. "Customers are fed up with the old ways and are voting in favor of choice, innovation and doing business with a company that cares about them and is willing to earn their business. For shareholders, we transformed the Company into a fierce, growing competitor that is changing the wireless industry and creating significant value."
