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MetroPCS banks on LTE after tough Q3

Tue, 11/01/2011 - 2:04pm
Maisie Ramsay, Wireless Week

MetroPCS is forging ahead with its LTE plans after a third quarter that saw fewer customers signing up for the operator's prepaid service.

The number of net new customers declined nearly 70 percent over last year, to 69,384. Churn worsened as customers left for other wireless providers, rising seven basis points to 4.5 percent.

MetroPCS said a rise in gross adds and economic pressures on its customers were accountable for the troubling churn numbers, but investors appeared worried that customers are leaving because of problems with the operator's network.

MetroPCS has moved aggressively into Android smartphones. During the third quarter, 49 percent of the phones sold by MetroPCS were Android, and about one-third of its customers now use smartphones.

However, the operator's limited spectrum assets leave it vulnerable to congestion from the bandwidth-hungry devices, which have become an increasingly large presence on its network over the past year. MetroPCS LTE service is as slow as 1 Mbps in some markets.

The LTE devices are also more expensive than MetroPCS' other phones and are less affordable for the operator's low-income customer base. The company declined to provide numbers on how many LTE smartphones it sold during the third quarter.

During an earnings call this morning, analysts peppered MetroPCS executives with questions about the quality of its service and its smartphone strategy.

MetroPCS executives said the company's recent deployments of EVDO carriers were helping to improve capacity, and they said MetroPCS would move aggressively to migrate its customers off of its legacy CDMA network onto its more spectrum-efficient LTE service.

"We have the capacity today to add four to five million subscribers to our network," CEO Roger Linquist said during the call. Once the company re-farms its CDMA spectrum for LTE, "we believe we'll have the capacity to install more than 10 million LTE subscribers," he added.

Before MetroPCS can go full-bore with LTE, however, it needs to find cheap smartphones with voice over LTE (VoLTE) service.

The operator is moving aggressively to deploy VoLTE so it can begin moving customers off CDMA, but the technology isn't yet completely ready for commercial deployment. The company said during the call that "everyone is working on our LTE For All project," and it hopes to launch its first VoLTE handsets around the middle of next year.

Linquist's comments about MetroPCS' LTE plans didn't seem to reassure investors, who remained concerned about the dip in new customers and a marked decline in profits. MetroPCS' stock dropped more than 12 percent in morning trading on the New York Stock Exchange.

Overall, MetroPCS saw its net income slide 10 percent to $69 million despite an 18 percent increase in sales, which hit $1.2 billion. The numbers missed analysts' expectations.

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