CHICAGO--(BUSINESS WIRE)--T-Mobile USA's difficulties in retaining postpaid wireless subscribers point to a continuation of operating challenges moving into 2012. As uncertainty lingers over the Department of Justice (DOJ) antitrust suit opposing AT&T Corp.'s proposed T-Mobile acquisition, Fitch Ratings sees limited growth opportunities for T-Mobile as a stand-alone carrier.
Third-quarter operating results at T-Mobile continued to highlight revenue problems linked to the ongoing loss of critical postpaid subscribers that contribute more to the company's margins and long-term growth potential. These negative postpaid trends are of particular concern since postpaid contract subscribers generate approximately 80% of the company's revenue.
Total revenue trends improved somewhat in the third quarter but remain negative. The modest improvement was due to T-Mobile's new niche value-oriented plans that will not likely generate a sustainable material increase in revenue.
With postpaid contract customers still expressing a clear preference for Apple's iPhone (not offered by T-Mobile) and faster competing LTE networks, we expect subscriber loss trends to continue for the foreseeable future. This follows a trend of postpaid subscriber losses that developed in mid-2009 due to declining share and pressured postpaid churn rates that were already considerably higher than industry averages.
As the only major U.S. wireless provider that does not offer the iPhone, T-Mobile's ssubscriber growth outlook remains dim. Following the October roll-out of Apple's iPhone 4S, postpaid subscriber losses are likely to accelerate in the fourth quarter.
Beyond short-term operating trends, T-Mobile could face broader competitive challenges due to the lack of a 4G network strategy based on LTE technology. While Verizon and AT&T are pushing ahead with LTE deployment plans that will shape the future of wireless technology,
T-Mobile does not have the capital or spectrum to introduce LTE technology.
Given the lack of a clear path to better wireless technology, T-Mobile faces an uncertain future as a stand-alone wireless carrier. This presents the DOJ with an interesting dilemma, since rejection of the deal could ultimately leave U.S. wireless customers with more choices in the short run, but it could limit prospects for T-Mobile's survival as a solid long-term competitive player.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
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