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MetroPCS Communications Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 29, 2012 05:24PM
MetroPCS Communications Inc. (PCS) filed Annual Report for the period ended 2011-12-31. Metropcs Commun has a market cap of $4.35 billion; its shares were traded at around $10.2 with a P/E ratio of 14.3 and P/S ratio of 0.9. Metropcs Commun had an annual average earning growth of 10.4% over the past 5 years.
Highlight of Business Operations:We offer our products and services to our customers under the MetroPCS® brand predominately through retail distribution. Our retail distribution includes independent retail outlets and Company operated retail stores. We also sell our services over the Internet using our own branded MetroPCS® website. Our independent retail outlets include a mixture of local, regional and national mass market dealers and retailers and specialty stores. Many of our dealers own and operate more than one retail sales location and may operate in more than one of our metropolitan areas. A substantial number of our retailers, dealers and corporate store locations, and certain other locations also accept payment for our services and many also perform other services for us. A significant portion of our gross customer additions have been added through our independent retail outlets. For the twelve months ended December 31, 2011, approximately 90% of our gross customer additions were through independent retail outlets.
Service Revenues. Service revenues increased $738.5 million, or 20%, to approximately $4.4 billion for the year ended December 31, 2011 from approximately $3.7 billion for the year ended December 31, 2010. The increase in service revenues is primarily attributable to net customer additions of approximately 1.2 million customers for the twelve months ended December 31, 2011 as well as a $0.78 increase in average revenue per customer compared to the year ended December 31, 2010.
Service Revenues. Service revenues increased $559.3 million, or 18%, to approximately $3.7 billion for the year ended December 31, 2010 from approximately $3.1 billion for the year ended December 31, 2009. The increase in service revenues is primarily attributable to net customer additions of 1.5 million customers for the twelve months ended December 31, 2010.
Churn. As we do not require a long-term service contract, our churn percentage is expected to be higher than traditional wireless carriers that require customers to sign a one- to two-year contract with significant early termination fees. Average monthly churn represents (a) the number of customers who have been disconnected from our system during the measurement period less the number of customers who have reactivated service, divided by (b) the sum of the average monthly number of customers during such period. We classify delinquent customers as churn after they have been delinquent for 30 days. In addition, when an existing customer establishes a new account in connection with the purchase of an upgraded or replacement phone and does not identify themselves as an existing customer, we count the phone leaving service as a churn and the new phone entering service as a gross customer addition (“false churn”). Churn for the year ended December 31, 2011 was 3.8%, compared to 3.6% for the year ended December 31, 2010. The increase in churn was primarily driven by an increase in gross additions, adjusted for false churn, in the first nine months of 2011 over the first nine months of 2010, and we believe continued economic pressures on our subscribers as well as increased data demands on our CDMA network driven by Android penetration. Churn for the year ended December 31, 2010 was 3.6%, compared to 5.5% for the year ended December 31, 2009. The decrease in churn was primarily related to the acceptance of our Wireless for All tax and regulatory fee inclusive service plans including a decline in false churn as we no longer offer the first month of service for free. Our customer activity is influenced by seasonal effects related to traditional retail selling periods and other factors that arise from our target customer base. Based on historical results, we generally expect net customer additions to be strongest in the first and fourth quarters. Softening of sales and increased churn in the second and third quarters of the year usually combine to result in fewer net customer additions during these quarters. See – “Seasonality.”
Average Revenue Per User. ARPU represents (a) service revenues plus impact to service revenues of promotional activity less pass through charges for the measurement period, divided by (b) the sum of the average monthly number of customers during such period. ARPU was $40.57 and $39.79 for the year ended December 31, 2011 and 2010, respectively, an increase of $0.78. The $0.78 increase in ARPU was primarily attributable to the continued demand for our Wireless for All and 4G LTE service plans offset by an increase in family plan penetration from 32% of our customer base in 2010 to 45% of our customer base in 2011. ARPU was $40.68 for the year ended December 31, 2009. The $0.89 decrease in ARPU for the year ended December 31, 2010 was primarily attributable to the new Wireless for All service plans that were introduced in January 2010, which include all applicable taxes and regulatory fees. This decrease was partially offset by our unlimited international calling plan that launched in June 2009.
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