Best-Ever Mobile Broadband Sales and Strong Cash Flows Highlight AT&T’s Fourth-Quarter Results; Stock Buyback Begins on Previous 300 Million Share Authorization

2012 Outlook: Solid Revenue, Margins and Earnings Growth with Strong Free Cash Flow

Dallas, Texas, January 26, 2012

• $(1.12) diluted EPS in fourth quarter compared to $0.18 diluted EPS in the year-ago period. Excluding significant items for both quarters, EPS of $0.42 compared to $0.55 in the year-ago quarter, driven by the company’s best-ever quarter for smartphone activations — up nearly 60 percent year over year
• Consolidated revenues of $32.5 billion, up $1.1 billion, or 3.6 percent, versus the year-earlier period
• In 2011, AT&T’s growth engines — wireless, wireline data and managed services — represented 76 percent of total revenues and grew 7.5 percent versus 2010, led in the fourth quarter by:
  • 10.0 percent growth in wireless revenues
  • 19.4 percent growth in wireless data revenues, up $956 million versus the year-earlier quarter
  • 16.4 percent growth in strategic business services revenues
  • 43.7 percent growth in consumer U-verse revenues
• 9.4 million smartphone sales, best-ever quarter and 50 percent more than previous quarterly record and nearly double 3Q11 sales; 82 percent of postpaid sales were smartphones
• 717,000 wireless postpaid net adds, the largest increase in five quarters; 2.5 million increase in total net wireless subscribers, with gains in every customer category
• Best-ever quarter for Android and Apple smartphones, including 7.6 million iPhone activations
• 571,000 branded computing device (tablets, aircards, etc.) sales, best-ever quarter to reach 5.1 million total subscribers; up almost 70 percent from a year ago
• 12th consecutive quarter with a year-over-year increase in postpaid wireless subscriber ARPU (average monthly revenues per subscriber), up 1.4 percent to $63.76 — more than $6 higher than nearest competitor’s ARPU
• Second consecutive quarter of sequential growth in wireline business revenues
• Sixth consecutive quarter of year-over-year growth in wireline consumer revenues, driven by AT&T U-verse^® services
• 208,000 net gain in AT&T U-verse TV subscribers to reach 3.8 million in service, with continued high broadband and voice attach rates

AT&T Inc. (NYSE:T) today reported fourth-quarter results highlighted by record sales, strong wireless network performance and improved wireline revenue trends.

“We had a tremendous year in terms of execution, and we have excellent momentum across our growth platforms,” said Randall Stephenson, AT&T chairman and chief executive officer.”This was a blowout quarter for sales. Our network performance is at a high level on voice quality and best-in-class mobile download speeds. Sales continue to be strong and business revenue trends are on a good track.

“Looking ahead, we start 2012 with the best visibility we’ve had in some time, and we’re well positioned to deliver solid results — including continued revenue growth with margin expansion, solid earnings per share growth and strong cash flow,” Stephenson said.”In short order, we will begin share repurchases to deliver significant value to our owners.”

Fourth-Quarter Financial Results
For the quarter ended December 31, 2011, AT&T’s consolidated revenues totaled $32.5 billion, up $1.1 billion, or 3.6 percent, versus the year-earlier quarter.

Compared with the fourth quarter of 2010, operating expenses were $41.5 billion versus $29.3 billion; operating loss was $9.0 billion, compared to operating income of $2.1 billion; and AT&T’s operating income margin was (27.7) percent, compared to 6.7 percent. Excluding fourth-quarter significant items, operating expenses were $28.1 billion versus $25.8 billion; operating income was $4.4 billion, compared to $5.6 billion; and operating income margin was 13.5 percent, compared to 17.7 percent.

Fourth-quarter 2011 net income attributable to AT&T totaled $(6.7) billion, or $(1.12) per diluted share. Excluding significant non-cash charges of $0.65 from the actuarial loss on benefit plans and $0.48 for directory asset impairments, along with a one-time charge of $0.44 for termination of the T-Mobile USA acquisition and a one-time gain of $0.03 from a tax settlement, adjusted earnings per share was $0.42.

(The actuarial loss on benefit plans was driven by a reduction in the discount rate from 5.8 percent to 5.3 percent. While our investment returns were better than the overall market, they were less than expectations; this was largely offset by better-than-expected force and medical cost management. The directory asset impairment resulted from an annual review of intangible assets compared to fair value.)

These results compare with reported net income attributable to AT&T of $1.1 billion, or $0.18 per diluted share, in the fourth quarter of 2010. Excluding significant items, earnings per share for the fourth quarter of 2010 was $0.55 per diluted share.

Fourth-quarter 2011 cash from operating activities totaled $7.5 billion, and capital expenditures totaled $5.5 billion. Also included in the fourth quarter, the company made a $1.0 billion contribution to the company’s pension fund. No additional funding is required in 2012. Free cash flow — cash from operating activities minus capital expenditures — totaled $2.0 billion.

Full-Year Results
For the full year 2011, compared with 2010 results, AT&T’s consolidated revenues totaled $126.7 billion versus $124.3 billion, up 2.0 percent; operating expenses were $117.5 billion, compared with $104.7 billion; net income attributable to AT&T was $3.9 billion versus $19.9 billion; and earnings per diluted share was $0.66 compared with $3.35. Excluding significant items, earnings per share totaled $2.20, compared with $2.29.

Compared with 2010 results, AT&T’s full-year cash from operating activities totaled $34.6 billion, down from $35.0 billion. Capital expenditures, including capitalized interest, totaled $20.3 billion versus $20.3 billion, including a 6.4 percent increase in wireless-related capital investment versus 2010, as AT&T aggressively deployed next-generation mobile broadband networks. Free cash flow totaled $14.4 billion, compared with $14.7 billion.

Outlook
AT&T is well positioned to deliver solid revenue and earnings growth with improving margins while returning substantial value to shareowners. In 2012, AT&T expects continued consolidated revenue growth, including postpaid wireless ARPU growth around 2 percent for the year. The company also expects to expand consolidated and wireless margins while keeping wireline margins stable. Achieving these targets will lead to mid-single-digit or better earnings growth with an opportunity to accelerate earnings growth beyond 2012. Outlook excludes any significant items. Importantly, little economic lift is assumed with these expectations.

AT&T expects capital expenditures to be about $20 billion, stable with 2011, as increases in wireless spending offset declines in wireline capital expenditures. The company also expects strong free cash flow, with full-year free cash flow in the $15 to $16 billion range, and plans to begin execution of its existing 300 million share repurchase authorization immediately.

WIRELESS OPERATIONAL HIGHLIGHTS
Record-setting mobile broadband sales and the company’s best postpaid subscriber growth in five quarters drove double-digit wireless revenue growth. AT&T continues to lead the industry in smartphone penetration, mobile broadband sales and postpaid ARPU. Highlights included:

Best Postpaid Growth in Five Quarters. AT&T posted a net increase in total wireless subscribers of 2.5 million in the fourth quarter to reach 103.2 million in service. This included gains in every customer category. Subscriber additions for the quarter include postpaid net adds of 717,000, the best gain in five quarters. Prepaid net adds were 159,000, connected device net adds were 1,029,000 and reseller net adds were 592,000. Fourth-quarter net adds reflect accelerated adoption of smartphones, including the October launch of iPhone 4S, increases in prepaid and reseller subscribers and sales of tablets and connected devices such as automobile monitoring systems, security systems and a host of other emerging products.

Record Quarter for Smartphone Sales. AT&T delivered its best-ever smartphone sales quarter — up nearly 60 percent from the year-ago period. (Smartphones are devices with voice and data capabilities and an advanced operating system to better manage data and Internet access.) In the fourth quarter, the company set a new record with 9.4 million smartphones sold, nearly double the number sold in the third quarter and 50 percent more than the previous quarterly record. Fourth-quarter smartphone sales represented more than 80 percent of postpaid device sales. Both iPhone and Android device sales set records. During the quarter, more than 7.6 million iPhones were activated, the majority of which were iPhone 4S, which went on sale Oct. 14, and more than twice as many Android smartphones were sold versus the fourth quarter a year ago. iPhone sales were helped by a superior customer experience, with AT&T delivering download speeds up to three-times faster than on other U.S. carriers’ networks.

At the end of the quarter, 56.8 percent of AT&T’s 69.3 million postpaid subscribers had smartphones, up from 42.7 percent a year earlier and 32.8 percent two years ago. The average ARPU for smartphones on AT&T’s network is 1.9 times that of the company’s non-smartphone devices. About 87 percent of smartphone subscribers are on FamilyTalk^® or business plans. Churn levels for these subscribers are significantly lower than for other postpaid subscribers.

Best-Ever Quarter for Branded Computing Device Sales. AT&T had its best sales quarter ever for branded computing subscribers, a new growth area for the company that includes tablets, aircards, mobile devices, tethering plans and other data-only devices. AT&T added 571,000 of these devices to reach 5.1 million, an almost 70 percent increase in total subscribers from a year ago. Most of those new subscribers were tablets, with 311,000 added in the quarter, more than half of which were postpaid.

Double-Digit Growth for Wireless Revenues. Total wireless revenues, which include equipment sales, were up 10.0 percent year over year to $16.7 billion. Wireless service revenues increased 4.0 percent, to $14.3 billion, in the fourth quarter.

Wireless Data Revenues Increase 19.4 Percent. Wireless data revenues — driven by Internet access, access to applications, messaging and related services — increased by $956 million, or 19.4 percent, from the year-earlier quarter to $5.9 billion. AT&T’s postpaid wireless subscribers on monthly data plans increased by 16.4 percent over the past year. The number of subscribers on tiered data plans also continues to increase. About 22 million, or 56 percent, of all smartphone subscribers are on tiered data plans, and about 70 percent have chosen the higher-tier plans.

Industry-Leading Postpaid ARPU Continues Growth. Driven by strong data growth, postpaid subscriber ARPU increased 1.4 percent versus the year-earlier quarter to $63.76. This marked the 12th consecutive quarter AT&T has posted a year-over-year increase in postpaid ARPU. AT&T continues to lead the industry with postpaid subscriber ARPU about $6 higher than the nearest competitor. Postpaid data ARPU reached $26.01, up 14.9 percent versus the year-earlier quarter.

Postpaid Churn Up Only Slightly. Despite record smartphone sales and the first holiday sales period since the loss of AT&T’s iPhone exclusivity, postpaid churn was up only slightly at 1.21 percent, compared to 1.15 percent in both the year-ago fourth quarter and in the third quarter of 2011. Total churn was up slightly at 1.39 percent versus 1.32 percent in the fourth quarter of 2010 and 1.28 percent in the third quarter of 2011.

Wireless Margins Reflect Record Sales. Fourth-quarter wireless margins reflect record-setting smartphone sales and customer upgrade levels. This was offset in part by improved operating efficiencies and further revenue gains from the company’s growing base of high-quality smartphone subscribers.

AT&T’s fourth-quarter wireless operating income margin was 15.2 percent versus 22.9 percent in the year-earlier quarter, and AT&T’s wireless EBITDA service margin was 28.7 percent, compared with 37.6 percent in the fourth quarter of 2010. (EBITDA service margin is earnings before interest, taxes, depreciation and amortization, divided by total service revenues.) Fourth-quarter wireless operating expenses totaled $14.2 billion, up 20.9 percent versus the year-earlier quarter, and wireless operating income was $2.5 billion, down 27.0 percent year over year.

WIRELINE OPERATIONAL HIGHLIGHTS
AT&T’s fourth-quarter wireline results were highlighted by the second consecutive quarter of sequential wireline business revenue growth, a 44 percent increase in U-verse revenues and solid cost management:

Sequential Wireline Business Revenue Growth Continues. Total business revenues grew sequentially for the second consecutive quarter. Revenues were $9.3 billion, down 1.4 percent versus the year-earlier quarter but a slight increase over the third quarter of 2011. The year-over-year decline reflects economic conditions and weakness in voice and legacy data products somewhat offset by growth in IP data. Business service revenues, which exclude CPE, declined 1.2 percent year over year, compared to a year-over-year decline of 4.3 percent in the year-ago quarter and were essentially flat sequentially, despite fewer business days in the fourth quarter.

Robust Strategic Business Services Revenues. Revenues from the new-generation capabilities that lead AT&T’s most advanced business solutions — including Ethernet, VPNs, hosting, IP conferencing and — grew 16.4 percent versus the year-earlier quarter, continuing strong trends in this area. This now represents a nearly $6 billion annualized revenue stream.

VPN Growth Drives Business IP Revenues. Total business IP data revenues grew 9.2 percent versus the year-earlier fourth quarter, led by growth in VPN revenues. IP-based solutions allow customers to easily add managed services such as network security, cloud services and IP conferencing on top of their infrastructures. Total business data revenues grew 1.3 percent year over year.

Wireline Consumer Revenues Continue Growth. Driven by strength in IP data services, revenues from residential customers totaled $5.3 billion, an increase of 0.5 percent versus the fourth quarter a year ago. The fourth quarter marked the sixth consecutive quarter of year-over-year growth.

208,000 U-verse Net Adds. AT&T U-verse TV added 208,000 subscribers to reach 3.8 million in service. As U-verse scales, its margins improve, contributing to profitability. In the fourth quarter, the AT&T U-verse High Speed Internet attach rate was 90 percent and about half of new subscribers took AT&T U-verse Voice. About three-fourths of AT&T U-verse TV subscribers have a triple- or quad-play option from AT&T. ARPU for U-verse triple-play customers was almost $170, up 2.5 percent year over year.

AT&T’s U-verse deployment has reached its goal of passing 30 million living units. Companywide penetration of eligible living units continues to grow and was at 15.9 percent in the fourth quarter, and 25.0 percent across areas marketed to for 36 months or more. AT&T’s total video subscribers, which combine the company’s U-verse and bundled satellite customers, reached 5.6 million at the end of the quarter, representing 23.9 percent of households served.

U-verse Broadband Continues Strong Growth. AT&T U-verse High Speed Internet delivered a fourth-quarter net gain of 587,000 subscribers to reach a total of 5.2 million, helping offset losses from DSL. Overall, AT&T lost 49,000 wireline broadband connections. About 74 percent of consumers have a broadband plan delivering speeds of 3 Mbps or higher versus 65 percent in the year-ago quarter.

U-verse Drives Consumer Revenue Transformation. U-verse continues to drive a transformation in wireline consumer, reflected by the fact that consumer IP revenues now represent 53.2 percent of wireline consumer revenues, up from 45.0 percent in the year-earlier quarter. Increased AT&T U-verse penetration and a significant number of subscribers on triple- or quad-play options drove 18.7 percent year-over-year growth in IP revenues from residential customers (broadband, U-verse TV and U-verse Voice) and 4.3 percent sequential growth. U-verse revenues grew 43.7 percent compared with the year-ago fourth quarter and were up 8.6 percent versus the third quarter of 2011.

Growth in Revenues Per Household Continues. Wireline revenues per household served increased 7.0 percent versus the year-earlier fourth quarter and were up 2.3 percent sequentially (average revenues per household is total wireline consumer revenues divided by the average monthly households in service), driven by AT&T U-verse services. This marked AT&T’s 16th consecutive quarter with year-over-year growth in wireline consumer revenues per household as U-verse scales and represents a larger portion of this category.

Consumer Connection Trends. In the fourth quarter, AT&T posted a decline in total consumer revenue connections primarily due to expected declines in traditional voice access lines, consistent with broader industry trends and somewhat offset by increases in U-verse TV and VoIP (Voice over Internet Protocol) connections. AT&T U-verse Voice connections increased by 136,000 in the quarter and 598,000 over the past four quarters. Total consumer revenue connections at the end of the fourth quarter were 41.3 million, compared with 43.4 million at the end of the fourth quarter of 2010 and 41.9 million at the end of the third quarter of 2011.

Wireline Revenues Down Slightly. Total fourth-quarter wireline revenues were $14.9 billion, down 1.4 percent versus the year-earlier quarter and down slightly sequentially. Fourth-quarter wireline operating expenses were $13.1 billion, down 0.2 percent versus the fourth quarter of 2010 and down 0.1 percent sequentially. Wireline operating income totaled $1.8 billion, down from $2.0 billion in the fourth quarter of 2010 and down versus the third quarter of 2011. AT&T’s fourth-quarter wireline operating income margin was 11.9 percent, compared to 13.0 percent in the year-earlier quarter and down slightly from 12.1 percent in the third quarter of 2011. Improved consumer and business IP data revenue trends and execution of cost initiatives helped to partially offset declines in voice revenues.

 

An internal document allegedly obtained from T-Mobile says the iPhone offers a “poor” customer experience on T-Mobile’s network. While it’s arguable that is a true statement since current iPhone models don’t support T-Mobile’s 1700MHz and 2100MHz 3G/4G bands and can only run on a second-generation EDGE network, there are now well over a million T-Mobile customers currently using unlocked iPhones on its network. The internal document instead asks customer service representatives to suggest customers buy T-Mobile’s 4G HSPA+ Android devices instead. We certainly understand where T-Mobile is coming from; obviously it wants to be able to control its customers’ experiences on its network. Plus, EDGE is far slower than the carrier’s HSPA+ network. As TMoNews points out, it’s more probable that customers find their data experience “limited” but not “poor,” given that some customers may argue that the iPhone itself offers a better hardware and software experience than several of T-Mobile’s 4G phones.

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Verizon on Tuesday reported its fourth quarter 2011 results. The company noted record revenue growth during the quarter, which it said was fueled by strong demand for wireless service. Revenue for the year totaled $110.9 billion, up 4% from 2010. Its quarterly revenue of $28.4 billion was up 7.7% from the same time period last year. Verizon Wireless, a joint venture between Verizon Communications and Vodafone, reported the highest number of retail net additions in three years driven by smartphone sales. Revenues tipped at $18.3 billion during the quarter, up 13% from the same period last year. Data revenues was up even higher year over year, at $6.3 billion, up 19.2% ($1 billion) from the same period one year prior. ARPU grew 2.6% to $53.14. Verizon also reported $0.85 EPS, down from $0.90 EPS in 2010. The carrier added a total of 1 million total net connections during the fourth quarter and 1.5 million retail customers, including 1.2 million retail postpaid customers. Postpaid churn was 0.94% for the quarter. Verizon’s full press release follows after the break.

Verizon Reports Record Revenue Growth in 4Q, Fueled by Strong Demand for Wireless, FiOS and Strategic Services

Verizon Generates Strong Cash Flows, 18.2 Percent Shareholder Returns in 2011; 4Q Earnings Impacted by Non-Cash Pension Items

 4Q 2011 HIGHLIGHTS

Consolidated

·         7.7 percent year-over-year quarterly revenue growth in 4Q, a company record.

·         A loss of 71 cents in diluted earnings per share (EPS), impacted by non-cash pension items, compared with earnings of 93 cents per share in 4Q 2010.

·         52 cents per share in adjusted EPS (non-GAAP), which excludes $1.23 per share in non-operational items, compared with 54 cents in adjusted EPS in 4Q 2010.

 

Wireless

·         $18.3 billion in total 4Q revenues, up 13.0 percent year over year; data revenues of $6.3 billion, up 19.2 percent, representing 41.6 percent of service revenues; $15.1 billion in service revenues, up 6.4 percent.

·         1.5 million retail net additions (excluding acquisitions and adjustments), largest increase in three years, includes 1.2 million retail postpaid net customer additions; 108.7 million total connections, includes 92.2 million retail customers.

·         2.6 percent growth in retail service ARPU over 4Q 2010; retail postpaid data ARPU up 14.3 percent.

·         23.7 percent operating income margin; 42.2 percent Segment EBITDA margin on service revenues (non-GAAP).

 

Wireline

·         201,000 FiOS Internet and 194,000 FiOS Video net additions, with increased sales penetration for both products; net increase of 98,000 broadband connections from 3Q 2011.

·         8.5 percent year-over-year increase in consumer ARPU; FiOS ARPU was more than $148 per month.

·         14.7 percent increase in strategic services revenues, representing 51 percent of global enterprise revenues.

·         3.0 percent operating income margin; 23.8 percent Segment EBITDA margin (non-GAAP), compared with 23.5 percent in 4Q 2010 and 21.4 percent in 3Q 2011.

 

NEW YORK – Verizon Communications Inc. (NYSE, Nasdaq: VZ) posted the highest year-over-year quarterly revenue growth in the company’s 11-year history in fourth-quarter 2011, fueled by continued strong demand for Verizon Wireless services and handsets, FiOS fiber-optic services, and strategic business products and services.

 

‘Great Momentum for 2012’

 

“Verizon finished 2011 very strong, both in terms of revenue growth and by delivering an 18.2 percent total return to our shareholders for the full year, and the company has great momentum for 2012,” said Lowell McAdam, Verizon chairman, president and chief executive officer.  “Verizon Wireless produced particularly strong growth in the fourth quarter.  While that diluted wireless margins in the short term, it is good news for revenue and margin growth over the long term, particularly given our leadership in the rapidly developing 4G LTE ecosystem.”

 

McAdam added: “Wireline margins recovered from third-quarter pressures, and we expect wireline margin expansion in 2012.  With recent strategic moves and our investments in FiOS, LTE, and global IP and cloud-based strategic services, Verizon has set the stage for accelerated growth across our business units, and we look to continue to build significant value for shareholders in 2012.”

 

Verizon’s total shareholder return is a combination of stock-price appreciation and dividend payments.  Regarding recent strategic moves, Verizon last month strengthened its ability to provide fully integrated solutions by creating Verizon Enterprise Solutions, a sales and marketing organization, to harness all of Verizon’s solutions for business and government customers globally.  In addition, Verizon Wireless announced agreements to purchase AWS (Advanced Wireless Spectrum) licenses, an important step toward meeting customers’ needs for wireless data and broadband services.

 

4Q and Full-Year Earnings Results

 

Due primarily to the impact of previously announced non-cash pension items, Verizon reported a loss of 71 cents in EPS in fourth-quarter 2011, compared with earnings of 93 cents per share in fourth-quarter 2010.

 

Adjusted fourth-quarter 2011 earnings (non-GAAP) of 52 cents per share exclude $1.20 per share, or $3.4 billion after-tax, due to the actuarial valuation of Verizon’s benefit plans, and 3 cents per share for the early extinguishment of debt.  This annual valuation adjustment, resulting from changes in actuarial assumptions, is in accordance with a Verizon accounting policy adopted last year.  Comparable adjusted fourth-quarter 2010 earnings were 54 cents per share, excluding the impact of non-operational items, the largest of which was a gain from benefit-plan valuation of 44 cents per share.

 

On an annual basis, Verizon reported 85 cents in 2011 EPS, compared with 90 cents per share in 2010.  Adjusted annual EPS (non-GAAP) was $2.15 in 2011, compared with $2.08 on a comparable basis (non-GAAP, excluding results from divested businesses) in 2010.

 

Consolidated Revenue Growth, Strong Cash Flows

 

In fourth-quarter 2011, Verizon’s total operating revenues were $28.4 billion on a consolidated basis, an increase of 7.7 percent compared with fourth-quarter 2010.  For full-year 2011, revenues totaled $110.9 billion, a 4.0 percent increase compared with 2010, when results included revenues from operations that have since been divested.  On a comparable basis (non-GAAP), Verizon’s 2011 full-year revenues increased 6.2 percent compared with 2010.

 

Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) totaled $29.4 billion in 2011.  On an adjusted basis (non-GAAP), EBITDA increased by more than $950 million in 2011 compared with 2010.

 

Cash flow from operating activities totaled $29.8 billion in 2011, and capital expenditures totaled $16.2 billion.  Free cash flow (non-GAAP, cash flow from operations less capex) was more than $13.5 billion in 2011.  From this total, Verizon returned $5.6 billion in quarterly dividends to shareholders in 2011, as the company’s Board of Directors approved a fifth consecutive year of dividend increases.

 

Verizon Wireless Delivers Strong Customer and Revenue Growth

 

In fourth-quarter 2011, Verizon Wireless delivered the highest number of retail net additions in three years and strong growth in revenues, driven by increased smartphone penetration and increased retail postpaid ARPU (average monthly service revenue per user).

 

Wireless Financial Highlights

·         Total revenues were $18.3 billion in fourth-quarter 2011, up 13.0 percent year over year.  Data revenues were $6.3 billion, up more than $1.0 billion or 19.2 percent year over year, and represented 41.6 percent of all service revenues.  Service revenues were $15.1 billion, up 6.4 percent year over year.  For full-year 2011, total revenues were $70.2 billion, up 10.6 percent over full-year 2010, and service revenues were $59.2 billion in 2011, up 6.3 percent year over year.

·         Retail service ARPU grew 2.6 percent over fourth-quarter 2010, to $53.14.  Retail postpaid ARPU grew 2.5 percent, to $54.80.  Retail postpaid data ARPU increased to $22.76, up 14.3 percent year over year.

·         In fourth-quarter 2011, wireless operating income margin was 23.7 percent, and wireless generated $6.4 billion of EBITDA.  Segment EBITDA margin on service revenues (non-GAAP) was 42.2 percent, down 530 basis points from fourth-quarter 2010.  For full-year 2011, operating income margin was 26.4 percent, down 310 basis points from full-year 2010; Segment EBITDA margin was 44.8 percent, down 210 basis points.

 

Wireless Operational Highlights

·         Verizon Wireless added 1.0 million total net connections in fourth-quarter 2011.  The company added 1.5 million retail customers, including 1.2 million retail postpaid customers.  While the wholesale channel grew during the fourth quarter, a loss of telematics customers resulted in a net decrease of 490,000 wholesale and other connections in the quarter.  These totals exclude acquisitions and adjustments.

·         At year-end 2011, the company had 108.7 million total connections, a 6.3 percent increase year over year, consisting of 92.2 million retail connections and 16.5 million wholesale and other connections.

·         At year-end 2011, smartphones accounted for 44 percent of the Verizon Wireless retail postpaid customer phone base, up from 39 percent at the end of third-quarter 2011.

·         Retail postpaid churn was 0.94 percent in fourth-quarter 2011, an improvement of 7 basis points year over year.  Total retail churn was 1.23 percent, an improvement of 14 basis points year over year.

·         Verizon Wireless continued to roll out its 4G LTE mobile broadband network, the largest 4G LTE network in the U.S.  As of Monday (Jan. 23), Verizon Wireless 4G LTE service was available to more than 200 million people in 195 markets across the U.S.

·         Verizon Wireless introduced six new 4G LTE devices in fourth-quarter 2011: the Droid Razr by Motorola; the Samsung Stratosphere; the HTC Rezound; the Galaxy Nexus by Samsung; and Droid Xyboard tablets in 10.1-inch and 8-inch form factors.  Earlier this month, the company announced that six additional 4G LTE devices would be available in the coming weeks, including two mobile hotspots, now called Jetpacks, from ZTE and Novatel; three smartphones – the Droid 4 and Droid Razr Maxx from Motorola, and the Spectrum from LG, which launched last week; and the Samsung Galaxy Tab 7.7.

·         In December, Verizon Wireless announced agreements to purchase AWS licenses from SpectrumCo – a joint venture of Comcast, Time Warner and Bright House Networks – and from Cox TMI Wireless.  The spectrum licenses under the two agreements cover 93 percent of the U.S. population, and the purchases are subject to regulatory approval.

·         Verizon Wireless’ 4G LTE network was ranked No. 1 on PC World’s 100 Best Products of 2011 list.  In October, RootMetrics ranked Verizon Wireless tops for network performance in Boston and 21 other cities nationwide; in November, Verizon Wireless won the RootMetrics RootScore award for data performance in 36 markets.

 

FiOS, Strategic Services Contribute to Revenue Growth

 

In fourth-quarter 2011, revenues and customers continued to increase for FiOS services, and sales of strategic services to business customers remained strong.  Segment EBITDA margins (non-GAAP) also increased both sequentially and year over year.

 

Wireline Financial Highlights

·         Fourth-quarter 2011 operating revenues were $10.1 billion, a decline of 1.5 percent compared with fourth-quarter 2010.  Consumer revenues grew 1.3 percent compared with fourth-quarter 2010.

·         In fourth-quarter 2011, wireline operating income was $300 million, up 18.6 percent from fourth-quarter 2010.  Segment EBITDA (non-GAAP) was $2.4 billion in fourth-quarter 2011, flat compared with fourth-quarter 2010 and an increase of $243 million from third-quarter 2011, when the Segment EBITDA was impacted by storm-related repair costs and a two-week strike.  Operating income margin was 3.0 percent in fourth-quarter 2011.  Segment EBITDA margin (non-GAAP) was 23.8 percent, compared with 23.5 percent in fourth-quarter 2010 and 21.4 percent in third-quarter 2011.

·         Consumer ARPU for wireline services was $96.43 in fourth-quarter 2011, up 8.5 percent compared with fourth-quarter 2010.  ARPU for FiOS customers totaled more than $148 in fourth-quarter 2011, rising approximately $2 year over year.  FiOS services to consumer retail customers represented 61 percent of consumer wireline revenues in fourth-quarter 2011.

·         Global enterprise revenues totaled $3.9 billion in the quarter, up 1.3 percent compared with fourth-quarter 2010.  Sales of strategic services – including Terremark cloud services, security and IT solutions, and strategic networking – increased 14.7 percent compared with fourth-quarter 2010 and represented 51 percent of global enterprise revenues in fourth-quarter 2011.

 

Wireline Operational Highlights

·         Verizon added 201,000 net new FiOS Internet connections and 194,000 net new FiOS Video connections in fourth-quarter 2011.  Verizon had a total of 4.8 million FiOS Internet and 4.2 million FiOS Video connections at year-end.

·         FiOS penetration (subscribers as a percentage of potential subscribers) continued to increase.  FiOS Internet penetration was 35.5 percent at year-end 2011, compared with 31.9 percent at year-end 2010.  In the same periods, FiOS Video penetration was 31.5 percent, compared with 28.0 percent, respectively.  The FiOS network passed 16.5 million premises at year-end 2011, up more than 900,000 from year-end 2010.

·         Broadband connections totaled 8.7 million at year-end 2011, a 3.3 percent year-over-year increase.  FiOS Internet connections more than offset a decrease in DSL-based HSI connections, resulting in a net increase of 98,000 broadband connections from third-quarter 2011.  Total voice connections, which measures FiOS Digital Voice connections in addition to traditional switched access lines, declined 7.2 percent to 24.1 million – the smallest year-over-year decline since first-quarter 2006.

·         Verizon continued to enhance its global portfolio of secure IT and advanced communications platforms and industry-focused solutions.  In fourth-quarter 2011, this included an expansion of the company’s Voice-over-IP service within the Asia-Pacific region and the rollout of an automated healthcare fraud-detection platform for private health insurers and government agencies.

·         Multinational corporations, leading businesses and government agencies – including Accenture plc; Chrysler Group LLC; the Commonwealth of Pennsylvania; GXS Inc.; MagnaCare Holdings Inc.; Tyson Foods Inc.; Consolidated Edison Company of New York Inc.; and Orange and Rockland Utilities Inc., a Con Edison subsidiary – completed new agreements or expanded their relationships with Verizon for a range of advanced communications and information technology solutions.  Verizon also announced that it had been named a prime contractor under the U.S. General Services Administration’s CONNECTIONS II contract to provide professional and managed services and custom networking solutions at federal facilities.

·         Verizon continued to broaden the scope and capabilities of its network infrastructure.  In fourth-quarter 2011, the company completed deployment of its next-generation 100 gigabit-per-second network route between New York City and Chicago and kicked off seven additional routes in the U.S.; expanded the Ethernet footprint to an additional 80 nodes supporting 23 areas in the Eastern part of the U.S.; expanded the global Private IP network into six additional countries in Africa and two more countries in the Middle East; and activated the first phase of the Europe India Gateway (EIG) submarine cable connecting Europe to the Middle East and Africa with 40G high-speed connections.

MetroPCS is interested in purchasing spectrum and subscribers from AT&T and T-Mobile, Bloomberg said Friday. Leap Wireless and Dish Network were also approached and Leap may still be interested in making an offer. The deal with MetroPCS would likely amount to less than $4 billion. In August, The Wall Street Journal revealed AT&T had hired Bank of America’s Merill Lynch to advise it on selling as much as $8 billion in assets. Later that month, the United States government sued to block the planned merger when the U.S. Justice Department said the deal would “substantially lessen competition” in the U.S. wireless market. Read on for more.

AT&T approached a number of carriers in September, including Sprint, offering to sell assets in an effort to remedy competition concerns. It remains unclear if selling assets will help it gain government approval.

“Spinning off some of T-Mobile’s customers or network doesn’t really remedy the government’s issue with the merger, which is that T-Mobile is such a disruptive and significant competitor that anything which makes them no longer independent would be unacceptable,” Duane Morris LLP lawyer Glenn Manishin explained to Bloomberg.

Manishin also noted that any sale of assets to Leap or MetroPCS would likely not be large enough to boost either carrier to a position where it might compete with AT&T, Sprint or Verizon Wireless on a national scale.

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HP’s customers are wary of purchasing new products from the company after its recent decision to kill off its webOS mobile operating system and possibly spin off its PC business. The chief information officer of Fluor Corp Ray Barnard told The Wall Street Journal his company typically spends $25 million per year upgrading its hardware and software. Barnard said that Fluor Corp was considering purchasing a number of HP computers capable of displaying 3D graphics, but has instead decided not to purchase from the company just yet. “I’ve put that all on hold” he told The Wall Street Journal. “It appears that they’re lost right now.” Read on for more.

Barnard’s opinion is shared by other HP customers as well. “This appears to just come out of the blue without a really good explanation,” the vice chancellor for information services at Purdue University said. “It makes you wonder what the strategy really is and where they are going.” There are loyal customers, however. DreamWorks Animation CTO Ed Leonard said that he will still do business with the company. “We trust them,” Leonard explained. “The worst thing you can have is companies that are afraid to make calls.”

Sprint announced on Tuesday that it is now selling access to its 4G WiMAX network, currently available in 71 markets across the United States, to its wholesale customers. Typically the carrier only sells its 3G network to wholesaler customers and it is now the first U.S. carrier to sell 4G wholesale. Sprint said that it will offer its customers the Sierra Wireless 250U 3G/4G data card as well as the HTC Detail 4G handset and the EVO Shift 4G. Mitel is among the first of Sprint’s wholesale customers to deploy a 4G network. Read on for the full press release from Sprint.

Another Industry First: Sprint Becomes First U.S. Wireless Carrier to Make 4G Available to Wholesale Customers

Sprint Enables Wholesale Customers with 4G Network Resale Opportunities and Award-winning Dual-mode Products to Help Capture Market Share

OVERLAND PARK, Kan. (BUSINESS WIRE), August 02, 2011 – Sprint [NYSE: S] is now enabling Wholesale customers with the power of faster download speeds and more bandwidth by providing them with access to America’s Favorite 4G Network.¹ Sprint is the only national wireless carrier to provide a Wholesale 4G offering. Available immediately for Sprint’s Wholesale customers are the Sierra Wireless 250U 3G/4G data card and HTC Detail 3G/4G handset, which has the same feature set as HTC EVO Shift^TM 4G, a member of the award-winning EVO family of devices. Sprint’s 3G/4G Wholesale roadmap includes additional handsets, data cards, hotspot devices and a fixed access alternative to be introduced in the coming months.

“Customers looking for a large and established 4G ecosystem should consider Sprint, as we offer access to more than 120 ecosystem partners, including chipset vendors, device and equipment manufacturers, applications developers, machine-to-machine solutions providers and more,” said Matt Carter, president Sprint Wholesale Solutions and New Ventures. “With Sprint 4G, the possibilities for our customers are endless. 4G is another fine example of the complete solutions we offer to help our customers harness their full potential.”

As businesses increasingly demand an in-the-office experience on the go, 4G is the best solution to answer that demand. Wholesale customers now having access to this technology means they can respond confidently to the demands of their small and medium sized business customers. Mitel is a Sprint Wholesale customer that has already deployed a 4G solution.

“Mitel was an early adopter of Sprint’s Wholesale 4G offering when we added the Sierra Wireless 250U 3G/4G data card to our product mix in fall 2010. We pride ourselves on delivering the Mitel difference, by providing our customers with the products and services that are hot in the market now,” says Jon Brinton, president of Mitel NetSolutions. “By adding 4G to our NetSolutions platform, and offering a mobile service that provides 4G speeds, we are bringing the leading edge of wireless technology solutions to our mobility customers.”

Wholesale customers can take advantage of Sprint’s leadership position with 4G devices, as the company has launched or announced two dozen 4G-capable devices since introducing 4G in 2008. Sprint made 4G a reality for customers in markets across the country when it was the first U.S. wireless carrier to launch a 3G/4G Android^TM-powered smartphone, the award-winning HTC EVO^TM 4G in June 2010. Sprint has built on its phone leadership by adding critically acclaimed 4G handsets from HTC, Motorola and Samsung to its industry-leading 4G device portfolio. Sprint 4G offers average download speeds between 3-6 Mbps, with bursts of over 10 Mbps.

Sprint 4G is available today in 71 markets across the United States, including but not limited to Atlanta, Boston, Chicago, Dallas, Denver, Houston, Los Angeles, Miami, New York City, San Francisco and Washington, D.C. operated over the Clearwire 4G network. For more information, visit www.sprint.com/4G.

Netflix could shed as many as 2.5 million paying customers as a result of its recent move to significantly increase the monthly cost of its DVDs-by-mail rental service. Netflix announced earlier this month that it would be adjusting its monthly rate plans. Whereas subscribers had been able to stream unlimited digital content and receive DVD rentals by mail for as little as $9.99 per month, Netflix’s new combination plans start at $15.98 per month, a 60% increase. Research firm TDG polled 500 Netflix customers who subscribed to DVD and streaming combination plans at the time Netflix announced the price hike. Based on the results of that survey, TDG estimates that Netflix stands to lose between 12% and 15% of combo plan subscribers within the next six months due to the new plan pricing. That would translate to between 2 million and 2.5 million subscribers — or a minimum of nearly $240 million annually. Many subscribers who might stay around also say they intend to switch off of their current combo plans; 34% told TDG they will switch to a streaming-only plan and 44% said they will opt for a DVD-only plan. Netflix warned investors during its earnings call that the rate plan changes could have a negative impact on its business in the near term.

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Amazon has stopped directly selling the Nintendo 3DS citing customer complaints as the cause of its decision. The portable gaming console currently has 359 reviews and an average of 4/5 stars on Amazon’s website, which suggests customers are happy with the unit itself, but the online retailer has posted a note that states:

While this item is available from other marketplace sellers on this page, it is not currently offered by Amazon.com because customers have told us there may be something wrong with our inventory of the item, the way we are shipping it, or the way it’s described here. (Thanks for the tip!)

We’re working to fix the problem as quickly as possible.

It remains unclear but Amazon could have stopped selling the 3DS because of a mistake in its original listing or due to customer complaints on how the product arrived. Techland is speculating that cause could be the “rubber feet” on the top lid. These feet are supposedly not adequate enough to prevent the screen from rubbing against the keypad while the console is closed. Gamers can still purchase the Nintendo 3DS from third-party retailers on Amazon.com however, and from a number of additional retailers across the country.

[Via Techland]

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AppleCare representatives can do a lot of things for Mac owners suffering software issues… except when it comes to malware. In an internal support article leaked to ZDNet, Apple instructs its call center representatives on how to handle calls from users reporting that they have a machine infected with the “Mac Defender” malware trojan. And, as you can see, Apple is definitely taking the hands-off approach. “AppleCare does not provide support for the removal of the malware,” reads the memo. “You should not confirm or deny whether the customer’s Mac is infected or not.” Apple certainly isn’t the first company to instruct its support representatives to shy away from virus/malware assistance, but it is notable as it is the first major Mac OS X virus that — thanks to some moderate social engineering — is propagating. Apple has yet to issue a public statement about the software’s existence or infection levels. The full memo is after the break.

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Netflix released its fiscal first quarter 2011 earnings on Monday and, thanks to record amounts spent on marketing, the firm reported an increase in net customer additions and a spike in revenues. The video subscription service added 3.3 million domestic net customers during the quarter, a 94% increase year-over-year — that service now serves 23.6 million subscribers globally. Netflix reported revenues of $719 million, up 46% year-over-year, and a net income of $60 million, an 88% jump from the same period a year ago. The company said noted that it expects DVD shipments to decline and spending on streaming content to “increase substantially” in the second quarter and beyond. Hit the jump for Netflix’s letter to shareholders.

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Verizon Wireless confirmed that it has more than 500,000 subscribers using its 4G LTE network. The HTC Thunderbolt, which launched as Verizon’s first 4G LTE phone, is responsible for 260,000 of those subscriptions. The wireless carrier said that it added about 500,000 4G LTE customers this quarter in addition to the 65,000 early adopters who signed on in Q4. Big Red will continue to build out its 4G LTE device portfolio in the coming months. In addition to the HTC Thunderbolt and Samsung DROID Charge – announced on Thursday – it has plans to launch 4G support for the XOOM, an LTE version of the Samsung GALAXY Tab, and the Motorola DROID Bionic later this summer. It also currently offers three 4G LTE USB modems and two 4G LTE hotspot devices.

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In the wake of Tuesday’s Netflix Instant outage, the company has issued a mea culpa and service credit to affected users. “We are sorry for the inconvenience this may have caused,” reads an email from Netflix. “If you attempted and were unable to instantly watch TV episodes or movies yesterday, click on this account specific link in the next 7 days to apply your 3% credit to your next billing statement for your Watch Instantly Unlimited plan.” The note does not explain why the service when down, rather it references “technical issues.” The full text of the letter is after the break.

Dear User,

Recently you may have had trouble instantly watching TV episodes or movies due to technical issues.

We are sorry for the inconvenience this may have caused. If you attempted and were unable to instantly watch TV episodes or movies yesterday, click on this account specific link in the next 7 days to apply your 3% credit to your next billing statement for your Watch Instantly Unlimited plan. Credit can only be applied once.

Ready to start watching again? Check out our latest selection.

Again, we apologize for any inconvenience and thank you for your understanding. If you need further assistance, please call us at 1-866-923-0898.

–The Netflix Team

While AT&T customers can clearly see the benefits of a merger with T-Mobile, customers of the company being acquired are having a difficult time seeing what’s in it for them. What will happen to T-Mobile’s current data plan offerings? Will handset releases slow down? How will this effect my monthly bill? The questions are plentiful and, unfortunately, many of them are unanswered at this point. Yet while the questions outnumber the answers, there is one thing I’m pretty certain of: whether this deal goes through or not, T-Mobile customers are going to benefit.

When you look at the AT&T, T-Mobile deal from a very high level, it looks like a disaster for customers of the latter company. AT&T, a carrier with higher plan prices and more money, swallowing up a smaller rival with more competitive rate plans and an impeccable customer service record. The company that was once dissolved into pieces for its market monopoly in 1982, is slowly beginning to put the franchise back together.

It’s only when you start to really dig into the terms of the agreement that you begin to realize what this deal actually means for T-Mobile and its customers. And how, if the deal were to be denied by U.S. regulators or scuttled by AT&T, there is still something in it for T-Mobile consumers. No matter which way the regulatory ball falls, T-Mobile’s customers win.

The terms of the deal are still very liquid, but a preliminary agreement has been announced by both parties. In exchange for $39 billion in cash and stock, AT&T will acquire T-Mobile and, more importantly, its portfolio of spectrum licenses. If approved, AT&T will take most of T-Mobile’s AWS spectrum and repurpose it for its future LTE rollout. A rollout that, if all goes according to plan, will blanket 95% of the population in the continental U.S. with sweet, sweet Long Term Evolution radio waves. AT&T will also assume control of T-Mobile’s network infrastructure, giving the company access to more towers and equipment in locations across the country. The combination of increased spectrum and networking equipment is expected to ease cellular-data bottlenecks that are very familiar to those who frequent major metropolitan areas like New York and San Francisco with AT&T devices. The hordes of T-Mobile customers — all 33.7 million of them — will be folded into AT&T and benefit from these investments and divestments as well.

But what if the deal falls through? What if U.S. regulators squash the deal or AT&T finds the nearly $40 billion premium too hefty? T-Mobile customers, and Deutsche Telekom,  will still make out just fine. In a conference call this morning, AT&T announced that if the merger is unsuccessful, it will pay T-Mobile USA $3 billion for its troubles. But it doesn’t stop there. AT&T will transfer to T-Mobile any of its AWS spectrum that is “not critical” to its initial LTE rollout and enter a roaming agreement with the carrier that will give it coverage in areas where T-Mobile does not overlap with AT&T. Again, T-Mobile customers will benefit from more spectrum and more coverage.

The big question that most T-Mobile customers will have — especially those who don’t know or care what “spectrum” is — will be, “will my monthly wireless bill increase?” And those are answers we may not have have until long after the deal is done. In the meantime, what I can tell the T-Mobile faithful is this: whether the deal goes through or not, you will definitely win from a network prospective.

The fourth quarter of 2010 — the busy holiday quarter — was not all that fruitful for the U.S.’s forth largest wireless provider. In an earnings call today, T-Mobile posted a nearly flat revenue number — $4.69 billion in Q4 2010 versus $4.71 billion in Q3 of 2010, and $4.65 billion in Q4 of 2009 — and less than stellar customer retention numbers. T-Mo saw net losses of 318,000 customers in Q4, along with a churn rate rising from 3.4% in Q3 to 3.6%. One bright spot on the company’s balance sheet is the 25% jump in “data services revenue” year-over-year.

“I am pleased with the increase in smartphone adoption and our ongoing improvement in data ARPU.  Data growth in the U.S. mobile market continues to accelerate and with the largest 4G network T-Mobile USA is well-positioned to differentiate itself and grow consumer usage,” said René Obermann, CEO of Deutsche Telekom. “We are not satisfied with contract churn, but we expect that the measures presented at the T-Mobile USA Investor Day in January will lead to improvements in 2011.”

T-Mobile’s full press release is after the break.

T-MOBILE USA REPORTS FOURTH QUARTER 2010 RESULTS

• Service revenues in the fourth quarter of 2010 at $4.69 billion, up 0.9% compared to the fourth quarter of 2009
• Blended data ARPU of $12.80 in the fourth quarter of 2010, up 25.5% from the fourth quarter of 2009
• 8.2 million customers using 3G/4G smartphones as of the fourth quarter, a net increase of 1 million customers in the fourth quarter of 2010
• OIBDA of $1.34 billion in the fourth quarter of 2010 was comparable to $1.38 billion in the fourth quarter of 2009
• America’s largest 4G network: T-Mobile USA’s national HSPA+ network now covers 200 million people delivering 4G speeds

BELLEVUE, Wash., February 25, 2011 — T-Mobile USA, Inc. (“T-Mobile USA”) today reported fourth quarter of 2010 results.  In the fourth quarter of 2010, T-Mobile USA reported service revenues of $4.69 billion compared to $4.65 billion in the fourth quarter of 2009, and OIBDA of $1.34 billion compared to $1.38 billion reported in the fourth quarter of 2009.  The number of customers using smartphones continued to increase significantly during the quarter, driving growth in blended data ARPU.  Blended data ARPU in the fourth quarter of 2010 was $12.80, up 25.5% from the fourth quarter of 2009.  Net customer losses were 23,000 in the fourth quarter of 2010 compared to 371,000 net customer additions in the fourth quarter of 2009.

“Our service revenues increased year-on-year in the fourth quarter.  Data ARPU growth rates are outperforming our main competitors as we leverage our 4G network and provide rich and compelling smartphones and data plans.  However, high contract churn and significant contract customer losses in the fourth quarter of 2010 indicate that we still have a fair amount of work ahead of us and that any turnaround will take time.  With the ongoing implementation of our challenger strategy we are laying the foundation for improved performance going forward,” said Philipp Humm, President and CEO of T-Mobile USA.

“I am pleased with the increase in smartphone adoption and our ongoing improvement in data ARPU.  Data growth in the U.S. mobile market continues to accelerate and with the largest 4G network T-Mobile USA is well-positioned to differentiate itself and grow consumer usage.  We are not satisfied with contract churn, but we expect that the measures presented at the T-Mobile USA Investor Day in January will lead to improvements in 2011,” said René Obermann, CEO of Deutsche Telekom.

Customers

• T-Mobile USA served 33.73 million customers (as defined in Note 3 to the Selected Data, below) at the end of the fourth quarter of 2010, down from 33.76 million at the end of the third quarter of 2010 and 33.79 million at the end of the fourth quarter of 2009.
• In the fourth quarter of 2010, net customer losses were 23,000, compared to net additions of 137,000 in the third quarter of 2010 and 371,000 in the fourth quarter of 2009.
• Contract customers were the primary driver for the sequential and year-on-year change in net customers.
• Contract net customer losses were 318,000 in the fourth quarter of 2010, compared to 60,000 net contract customer losses in the third quarter of 2010, and 117,000 net contract customer losses in the fourth quarter of 2009.
• Sequentially and year-on-year, the decline in net contract customers was driven primarily by fewer contract gross customer additions.  Traditional postpay gross customer additions decreased in the fourth quarter of 2010 driven primarily by revised credit standards and competitive intensity.  FlexPay^SM contract gross customer additions also decreased related to competitive intensity.
• Connected device net customer additions, included within contract customers (as defined in Note 3 to the Selected Data, below), were lower in the fourth quarter of 2010 than in the third quarter of 2010 and now total 1.9 million at December 31, 2010.
• Prepaid net customer additions, including MVNO customers (as defined in Note 3 to the Selected Data, below), were 295,000 in the fourth quarter of 2010, compared to 197,000 in the third quarter of 2010 and 488,000 in the fourth quarter of 2009.
• MVNO customer additions were the primary driver of prepaid net customer additions.  MVNO customers totaled 2.8 million at December 31, 2010.
• Year-on-year, FlexPay No-Contract net customer losses were the primary reason for the decrease in prepaid net customer additions.

Churn

• Blended churn (as defined in Note 2 to the Selected Data, below), including both contract and prepaid customers, was 3.6% in the fourth quarter of 2010, up from 3.4% in the third quarter of 2010 and 3.3% in the fourth quarter of 2009.
• The sequential and year-on-year increase was driven primarily by prepaid churn.
• Contract churn was 2.5% in the fourth quarter of 2010, up from 2.4% in the third quarter of 2010 and consistent with the fourth quarter of 2009.
• The sequential increase in contract churn was due primarily to higher churn of connected devices in the fourth quarter of 2010 and competitive intensity.
• Prepaid churn increased in the fourth quarter of 2010 to 7.5% from 7.2% in the third quarter of 2010 and 6.8% in the fourth quarter of 2009.
• The sequential and year-on-year increase in prepaid churn was driven primarily by MVNO customers.

OIBDA and Net Income

• T-Mobile USA reported OIBDA (as defined in Note 6 to the Selected Data, below) of $1.34 billion in the fourth quarter of 2010, consistent with $1.32 billion in the third quarter of 2010 and $1.38 billion in the fourth quarter of 2009.
• Compared to the fourth quarter of 2009, OIBDA decreased slightly due primarily to a higher equipment subsidy loss from more customers upgrading to smartphones (as defined in Note 11 to the Selected Data, below).
• OIBDA margin (as defined in Note 7 to the Selected Data, below) was 29% in the fourth quarter of 2010, up from 28% in the third quarter of 2010 but down from 30% in the fourth quarter of 2009.
• Net income in the fourth quarter of 2010 was $268 million, compared to $320 million in the third quarter of 2010 and $306 million in the fourth quarter of 2009.

Revenue

• Service revenues (as defined in Note 1 to the Selected Data, below) were $4.69 billion in the fourth quarter of 2010, consistent with $4.71 billion in the third quarter of 2010 and up slightly from $4.65 billion in the fourth quarter of 2009.
• Service revenues in the fourth quarter of 2010 were positively impacted by data revenue growth, driven by the adoption of mobile broadband data plans, the revenue contribution from providing handset insurance services, and higher prepaid revenues from the growth of unlimited usage plans.  In the fourth quarter of 2010, T-Mobile USA began directly providing handset insurance services which had previously been provided by a third party.
• Year-on-year, quarterly service revenues increased due primarily to data revenue growth and from directly providing handset insurance services which more than offset voice revenue declines.  The 0.9% increase in quarterly service revenues year-on-year in the fourth quarter of 2010 was an improvement from the 0.5% year-on-year decrease in the third quarter of 2010.
• Total revenues, including service, equipment, and other revenues were $5.36 billion in the fourth quarter of 2010, consistent with $5.35 billion in the third quarter of 2010 but down slightly from $5.41 billion in the fourth quarter of 2009.
• Equipment revenues decreased year-on-year due primarily to lower sales volumes.

ARPU

• Blended Average Revenue Per User (“ARPU” as defined in Note 1 to the Selected Data, below) was $46 in the fourth quarter of 2010, down slightly from $47 in the third quarter of 2010 but consistent with the fourth quarter of 2009.
• Contract ARPU was $52 in the fourth quarter of 2010, consistent with the third quarter of 2010 and up slightly from $51 in the fourth quarter of 2009.
• Year-on-year contract ARPU increased as data revenue growth and handset insurance revenues more than offset lower voice revenue.
• Prepaid ARPU was $19 in the fourth quarter of 2010, consistent with the third quarter of 2010 and up from $18 in the fourth quarter of 2009.
• The increase in prepaid ARPU compared to the fourth quarter of 2009 was due primarily to the growth of customers on unlimited usage plans.
• Data service revenues (as defined in Note 1 to the Selected Data, below) were $1.29 billion in the fourth quarter of 2010, up 25% from the fourth quarter of 2009.  Data service revenues in the fourth quarter of 2010 represented 28% of blended ARPU, or $12.80 per customer, up from 27% of blended ARPU, or $12.40 per customer in the third quarter of 2010, and 22% of blended ARPU, or $10.20 per customer in the fourth quarter of 2009.
• 8.2 million customers were using smartphones enabled for the T-Mobile USA UMTS/HSPA/HSPA+ network (as defined in Note 11 to the Selected Data, below) such as the T-Mobile^® myTouch^® 4G, T-Mobile G2^TM with Google^TM and the Samsung Vibrant^TM at the end of the fourth quarter of 2010.  This was a net increase of 14% or 1 million customers using smartphones from the third quarter of 2010 and more than double the 3.9 million customers as of the fourth quarter of 2009.  3G/4G smartphone customers now account for 24% of total customers, up from 21% in the third quarter of 2010 and 12% in the fourth quarter of 2009.
• While messaging continues to be a significant component of blended data ARPU, the increase in the number of customers using smartphones and the continued upgrade of the network are driving Internet access revenue growth with the increasing adoption of mobile broadband data plans.

CPGA and CCPU

• The average cost of acquiring a customer, Cost Per Gross Add (“CPGA” as defined in Note 5 to the Selected Data, below) was $290 in the fourth quarter of 2010, consistent with the third quarter of 2010 but down from $300 in the fourth quarter of 2009.
• Year-on-year, CPGA decreased in the fourth quarter of 2010 due primarily to the shift in customer base towards MVNO customers and connected devices.
• The average cash cost of serving customers, Cash Cost Per User (“CCPU” as defined in Note 4 to the Selected Data, below), was $24 per customer per month in the fourth quarter of 2010, consistent with the third quarter of 2010 and up from $22 in the fourth quarter of 2009.
• Year-on-year, CCPU was higher due primarily to a higher equipment subsidy loss as more customers upgraded to smartphones and the cost of directly providing handset insurance services.

Capital Expenditures

• Cash capital expenditures (as defined in Note 8 to the Selected Data, below) were $2.8 billion in 2010, compared to $3.7 billion in 2009.
• The primary reason for lower cash capital expenditures relates to the 2009 build-out of the national UMTS/HSPA network.  In 2010 cash capital expenditures were driven by continued network investment including coverage expansion and the upgrade to HSPA+.
• Cash capital expenditures were $828 million in the fourth quarter of 2010, compared to $643 million in the third quarter of 2010 and $697 million in the fourth quarter of 2009.
• Sequentially, the increase in cash capital expenditures was due primarily to the build out of the network, including new cell sites and the HSPA+-enabled 4G network upgrade (as defined in Note 10 to the Selected Data, below).  With the latest expansion, T-Mobile USA’s 4G network is available in more than 100 major metropolitan areas, reaching 200 million people at the end of 2010.
• Year-on-year, the increase in cash capital expenditures was due primarily to payment timing differences.

T-Mobile USA Recent Highlights

• On January 20, 2011 T-Mobile USA and Samsung Telecommunications America (Samsung Mobile) revealed the Galaxy S™ 4G.  Powered by Android™ 2.2, the Galaxy S 4G is  T-Mobile USA’s first smartphone capable of delivering theoretical peak download speeds of up to 21 Mbps, delivering rich entertainment experiences on T-Mobile USA’s 4G network (previous 4G smartphones, such as the myTouch 4G and the G2, were enabled for 14.4 Mbps).  The Samsung Galaxy S 4G is exclusive to T-Mobile USA and went on sale on February 23.
• On February 1, 2011 T-Mobile USA announced that it will introduce the T-Mobile Global for Business^TM plan, a unique approach to international voice and data roaming that reinforces the company’s commitment to support multinational corporations, as well as government agencies and U.S. enterprises conducting business internationally.
• On February 2, 2011 T-Mobile USA and LG Mobile Phones unveiled their Android™ 3.0 (Honeycomb)-powered tablet, the T-Mobile^® G-Slate™ with Google™ by LG.  With a brilliant, high-definition (8.9-inch, 3D-capable multi-touch display, the T-Mobile G-Slate delivers a groundbreaking mobile entertainment experience, including the ability to record 3D and full HD video. The tablet is expected to be available this spring.  T-Mobile USA’s 4G network, America’s largest 4G network™, is currently available in more than 100 major metropolitan areas, reaching 200 million people nationwide.  With aggressive plans to expand and double the speed of its 4G network in 2011, T-Mobile USA expects that 140 million Americans in 25 major metropolitan areas will have access to increased 4G speeds (HSPA+ 42 Mbps) by mid-year 2011.
• On February 3, 2011 T-Mobile USA was awarded the highest ranking for the second consecutive time (and the 11th time in the last 13 surveys) in J.D. Power and Associates’ 2011 Wireless Customer Care Performance Study^SM — Volume 1.
• On February 17, 2011 T-Mobile USA continued its streak of recognition for excellence in customer satisfaction with the fourth consecutive highest ranking in J.D. Power and Associates’ 2011 Wireless Retail Sales Satisfaction Study^SM— Volume 1 results. T‑Mobile USA ranked not only highest overall, but the highest in each area for which the study measured customer satisfaction.

T-Mobile USA is the U.S. wireless operation of Deutsche Telekom AG (OTCQX: DTEGY).  In order to provide comparability with the results of other US wireless carriers, all financial amounts are in US dollars and are based on accounting principles generally accepted in the United States (“GAAP”).  T-Mobile USA results are included in the consolidated results of Deutsche Telekom, but differ from the information contained herein as Deutsche Telekom reports financial results in Euros and in accordance with International Financial Reporting Standards (IFRS).

This press release includes non-GAAP financial measures.  The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP.  Reconciliations from the non-GAAP financial measures to the most directly comparable GAAP financial measures are provided below following Selected Data and the financial statements.

Pre-orders for the Verizon iPhone for existing customers start tomorrow at 3AM, and now that the date is rapidly approaching, we have to ask… after years and years of waiting, begging, pleading, and refusing to switch to another carrier, are you going to pull the trigger? Let us know in the poll if you’re planning on pre-ordering a Verizon iPhone, alright?