MetroPCS Communications Earnings Call Insights: Promotions and Budgets

On Tuesday, MetroPCS Communications Inc (NYSE:PCS) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.


Richard Prentiss Jr. – Raymond James: A couple of questions. First on – and our thoughts are with everybody up in the Northeast and even the Mid-Atlantic as they got hit pretty hard. As Floridians we’re used to hurricanes, but that’s pretty tough. First on ARPU, kind of what are you thinking the trends on ARPU are looking like in regards to the family plan mix versus LTE? Tom, you were mentioning the $30 promotional plan. What do you think that does as far as ARPU trends, but also maybe talking about gross ad share now that you’ve got a handset lineup a little bit more exciting?

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Thomas C. Keys – President and COO: I’ll take the first stab at that Rick. One thing I noticed, I was going back over some numbers and if we go back to Q3 2010, we were in the $39.70 range for ARPU. So over the last two years we’ve been able to actually increase ARPU in average about $0.81 over the last 24 months. So, I think as the handset lineup moves to a more LTE defined network, we’re going to see more people utilizing the rate plans that we have. We’ve put the $30 rate plan out there as promotional and we believe it really does help door swings. It seems a very nice trending off of that. We obviously want our customers to utilize the network, but remember it only comes with 250 megabits of 4G data. So once they get there, we think it’s actually an opportunity to springboard to higher rate plans once they understand what the device can do and how they benefit from the network. So we think that can be a long-term positive. But again we’re just rolling that out, it’s really too early to tell what any impact is. We’ve certainly seen we think good attraction as Braxton has mentioned before on the $25 rate plan. It has really good economics on the network. It comes with no data on the feature phone and we think that gives us a really good (farm team) promotion and as mentioned, a large percentage of our new recruits on the 4G network are taking the $55 rate plan, which means that there’s a great traction around that. Our challenge in the fourth quarter as always is to stay relevant and get our message out there. So rate plans I think will lead to stabilized ARPU, but it’s really difficult to tell you what each individual rate plan will do for us, it’s going to be a mixture.

Richard Prentiss Jr. – Raymond James: As far as share of gross adds?

Roger D. Linquist – Chairman and CEO: Rick, I think it’s fair to say that with a $30 LTE plan and the $25 talking tax, that kind of best case was flat, you could be down sequentially, not significantly, but of course the real positive there is a significant part of our mix is now LTE at the $55 and higher rate plans, would still somewhat mitigate the pressure.

Richard Prentiss Jr. – Raymond James: I haven’t gotten the deck yet. What percent of your base upgraded in the quarter, you got the dollar on a CPU basis, but what was the percent of the base that upgraded?

Roger D. Linquist – Chairman and CEO: 9%.

Richard Prentiss Jr. – Raymond James: 9?

Roger D. Linquist – Chairman and CEO: Yeah, compared to 12% in the prior year third quarter. You heard Tom’s comments related to the significant increase in upgrades in September going into October, and again I just want to emphasize that with the really affordable 4G LTE handsets that we are going to see, what we believe very significant potentially higher than historical fourth quarter upgrades which will pressure EBITDA during the quarter. We’ve talked the last two quarters that the first wave of 4G LTE would be organic through the base then translating into what we believe is new customers coming into the fold, but just want to emphasize that point.

Richard Prentiss Jr. – Raymond James: The handsets that you are selling, will those phones be able to work on a T-Mobile network, as they are looking to rolling out their LTE. Obviously you have CDMA plus LTE, they’ll have GSM plus LTE, but will these phones that you are upgrading now will be able to work easily on to a T-Mobile network post-closing?

Roger D. Linquist – Chairman and CEO: Yes, because it’s more of a banding issue for LTE; obviously not the CDMA portion, but the LTE will certainly work on the PCS/AWS bands.


Philip Cusick – JPMorgan: So, a couple of questions. I guess, first of all, last quarter your guidance was that marketing and upgrades to sort of increase significantly in the third quarter. Marketing budget looks like it was more flat and down a little bit. I was surprised the LTE For All effort didn’t push that a little harder. What was the sort of pacing? Was July just so low that the spending in September didn’t offset it?

Roger D. Linquist – Chairman and CEO: As you know, Phil, we introduced the lineup with the first handset in late August and I think you’re seeing a channel fill and the introduction of several phones; one was the LG Motion which is a very attractive phone and that was one of the leaders. Then followed by the (ODM), the Yulong Coolpad, which was in the early September timeframe. So, we just were through a launch period and we’re beginning to get traction in September. So, I’d look at this as a late third quarter phenomenon for LTE.

Philip Cusick – JPMorgan: And on CapEx, your guidance implies a pretty big acceleration in the fourth quarter. Can you talk about any specific projects you’re going to be driven there and given the really short lifespan of your network under the current plan, why does it makes sense to do that?

J. Braxton Carter – Vice Chairman and CFO: Well, first of all, and then I’ll pass it over to Roger. Phil, I think that you should probably plan on it being well end of the guidance. We certainly have a lot of projects that have been ongoing that are coming to fruition and completion. We’ve talked about the significant microwave backhaul efforts, other things where we’re going to have definitely a step-up of CapEx during the fourth quarter, but your expectation should be at the lower part of that range. Roger?

Roger D. Linquist – Chairman and CEO: Yeah, I think there’s much momentum in the projects that we have as Braxton mentioned. Certainly, our focus now is to carry on business in a very strong and robust way until the uncertainties of this combination are completely known.

A Closer Look: MetroPCS Communications Earnings Cheat Sheet>>