MetroPCS Communications Inc.
(
PCS
) reported third-quarter 2012 earnings per share of 52 cents that
topped the Zacks Consensus Estimate of 26 cents and shot up
173.7% from 19 cents in the year-ago quarter.
Total revenue climbed 6% year over year to $1,259.2 million in
the third quarter, beating our expectation of $1,253 million.
Adjusted EBITDA spiked 42% year over year to $466 million. The
company generated record EBITDA margin (adjusted EBITDA as a
percentage of service revenues), which increased by a whopping
1260 basis points (bps) to 41.5%.
Operational Metrics
Average revenue per user (ARPU) was $40.5 in the reported
quarter compared with $40.8 in the year-ago quarter. Cost per
user (CPU) dipped 5.8% year over year to $18.38.
Cost per gross addition (CPGA) crept up 4.3% year over year to
$202.24. Churn (customer switch) was 3.7% in the third quarter,
decreased 80 bps from the prior-year quarter.
Subscriber Statistics
MetroPCS lost 312,291 subscribers during the quarter compared
to subscriber addition of 69,384 in the year-ago quarter. Total
subscriber base at the end of the reported quarter was 8.98
million customers (down 2% year over year). Consolidated
penetration of the covered population was 8.8% against 9.1% in
the prior-year quarter.
Liquidity
The company ended the third quarter with cash and cash
equivalents (inclusive of short term investment) of $2,565.2
million compared with $2,243.2 million at the end of the year-ago
quarter. Quarterly long-term debt was $4.731 billion compared
with $4.711 billion in the comparable quarter last year.
Guidance
For fiscal 2012, MetroPCS maintained its prior expectation of
capital expenditures in the range of $0.9 billion to $1.0
billion.
Our Analysis
MetroPCS remains hopeful that the launch of its 4G LTE for All
program will enable it to add subscribers in near future. The
company expects to further expand its LTE services, which
currently serves 8% of its existing subscriber base. With faster
broadband speed the company aims at fulfilling the growing demand
for data services. Further, the stellar operating performance in
terms of record adjusted EBITDA and EBITDA margin remains
encouraging despite substantial subscription losses. Moreover,
the company plans to merge with T-Mobile USA, which will not only
solve the company's spectrum shortage issue but at the same time
will help them to cover huge footprints across the U.S.
However, we remain cautious on associated expenditures on
expansion plans that may weigh over the margins. Further, the
company faces stiff competition from peers like
United States Cellular
(
USM
).
We are currently maintaining our long-term Outperform rating
on MetroPCS, supported by a Zacks #3 Rank (Hold).
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