MetroPCS Communications Inc.
’s (PCS) second quarter results missed Zacks Estimates. Total revenues of $859.6 million were an improvement of 26.6%, compared to the same quarter of the previous year but below Zacks Estimates of $862 million. On a GAAP basis, net income in the second quarter was $26.2 million, a decrease of 48% year over year. EPS for the quarter was $0.07, compared to $0.14 in the prior-year quarter. This was also below the Zacks Consensus Estimate of $0.12.
Operating expense, in the second quarter was $743.8 million, up 37% year over year. Income from operation, in the same quarter was $115.8 million, down 14.6% year over year. Segment wise, Service revenue was $766.9 million in the second quarter, up 28% year over year. Equipment revenue was $92.8 million in the same quarter, up 15.6% year over year. Consolidated adjusted EBITDA was $234 million in the reported quarter, up 11% year over year.
Consolidated net subscriber addition during the second quarter was 205,585, compared to 183,530 in the year-ago quarter and 684,000 in the previous quarter. Out of 205,585 net additional subscribers, 12,645 were added in the core markets and the rest 192,940 were added in the Northeast markets. Consolidated penetration of covered POPs in the quarter was 7.2%, compared to 8.1% in the prior-year quarter.
The low-cost prepaid wireless communications market in the U.S. is highly competitive. Besides MetroPCS, other formidable players in this sector include Leap Wireless International Inc. (LEAP), Boost Mobile, a division of Sprint Nextel (S), and Tracfone Wireless, a division of America Movil S.A. (AMX). Almost all the competitors have either reduced their offer price or added several innovative features into their existing service plans. During the quarter, monthly average churn rate, a measure of customer attrition rose significantly for MetroPCS. Churn rate in the quarter was 5.8%, significantly higher, compared to just 4.5% in the prior year quarter. As a result, Average Revenue per User (ARPU) in the quarter was $40.52 compared to $42.05 in the year-ago quarter.
Balance sheet remains leveraged for MetroPCS. Cash and marketable securities at the end of the second quarter was approximately $1 billion, compared to $704 million. Total debt was $3.6 billion, compared to $3.1 billion of the prior-year quarter. MetroPCS generated a positive free cash flow (cash flow from operations less capital expenditure) of $10.9 million, compared to a negative free cash flow of $57.1 million in the prior-year quarter.
MetroPCS, however, reaffirmed its financial and operational guidance for the current fiscal year. The company expects its net subscriber addition to be between 1.4 million to 1.7 million on a consolidated basis for 2009. Consolidated adjusted EBITDA is expected to be within the range of $900 million to $1.1 billion in the same fiscal year.
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