* MetroPCS Q1 adj EPS $0.08 vs est $0.09: Reuters Estimates
* MetroPCS Q1 EBITDA up 12 percent
* MetroPCS ARPU falls 5 pct, churn rises
* Leap ARPU falls 6 pct, churn rate down
By S. John Tilak
BANGALORE, May 7 (Reuters) - Low cost wireless carriers MetroPCS Communications Inc PCS.N and Leap Wireless Inc LEAP.O reported strong subscriber additions for the first quarter, riding on increased demand for prepaid plans as customers pinch pennies in a down economy.
MetroPCS, which competes with Sprint-Nextel (S.N) unit Boost Mobile, said it added 684,000 net subscribers in the quarter, the highest quarterly net additions in its history.
Leap Wireless more than doubled net customer additions to 493,000 during the quarter. It expects the figure to touch more than 1.5 million in 2009.
Both carriers lure users by offering unlimited calls on their rate plans, which are priced much lower than those from national carriers such as AT&T Inc (T.N) and Verizon Wireless.
Sprint Nextel unit Boost Mobile intensified competition in the low-cost segment earlier this year with its $50-a-month unlimited plan.
MetroPCS Chief Financial Officer Braxton Carter said people were “gravitating towards” the company’s service in part due to concerns about the weak economy.
“They’re wanting to save money. They’re wanting to have predictability. They’re wanting to cut the cord,” Carter said in an interview with Reuters.
For the first quarter, MetroPCS reported a 12 percent rise in consolidated adjusted earnings before interest, taxes, depreciation and amortization to $199 million.
The company’s results were boosted by strong growth in its new markets such as New York and Boston.
“It was the first quarter in a long time there were no physical wrinkles,” said Soleil/Nelson Alpha Research analyst Michael Nelson, who termed the results as “very strong across the board.”
Net income was $44 million, or 12 cents a share, up from $39.5 million, or 11 cents, a year earlier. [ID:nWNAB5121]
According to Reuters Estimates, the company, however, earned 8 cents a share, excluding items, missing analysts’ consensus estimate of 9 cents.
For 2009, MetroPCS said it continues to expect net subscriber additions of 1.4 million to 1.7 million on a consolidated basis.
However, the company’s shares, which had gained 19 percent so far this year, slumped as much as 10 percent.
The sell-off was due to profit-taking and not because of any concerns over the results, Nelson said, noting that the stock had gained 5 percent over the last six trading days.
In a bid to boost the subscriber base, both MetroPCS and Leap have been offering attractive rate plans, resulting in lower average revenue per user (ARPU).
ARPU for MetroPCS fell 5 percent in the first quarter to $40.40 from the year-ago period. Leap’s ARPU fell 6 percent to $42.21, but the company said it expects ARPU to come under pressure in subsequent quarters. [ID:nWNAB6116]
MetroPCS’s churn rate, a measure of customer attrition, rose to 5 percent from 4 percent in the prior-year quarter. However, Leap reported a fall in customer churn to 3.3 percent from 3.6 percent.
MetroPCS has been rapidly expanding into new markets in the east coast, pitting itself against larger carriers. It entered the lucrative markets of New York and Boston in February. The company already has a presence in Los Angeles and Philadelphia.
“They’ve done phenomenally well in New York and Boston,” analyst Nelson said. “They came out of the gate extremely strong.”
The company added 249,000 net subscribers in the north east.
MetroPCS expects to capture 4 percent to 5 percent market share in New York and Boston in the first year of launch, Carter said.
At a post earnings conference call, Leap Wireless said it expects to launch new markets in Baltimore and Washington by middle of this year.
The company launched its services in Chicago and Philadelphia in late first quarter.
Leap reported first-quarter net loss of $47.4 million, or 74 cents per share, compared with a loss of $16.9 million, or 28 cents per share, a year earlier. [ID:nWNAB5963]
Revenue rose 28 percent to $587 million.
Analysts expected a loss of 73 cents a share, excluding exceptional items, on revenue of $594.7 million, according to Reuters Estimates.
The company reported adjusted operating income before depreciation and amortization (OIBDA) for the consolidated business of $96.8 million for the first quarter of 2009, compared to $118.7 million for the first quarter of 2008.
The 18 percent drop in OIBDA was due to investments the company made to launch additional new markets and fully integrate its Cricket broadband service.
Shares of the company were largely flat in trading after the bell. They had closed at $34.95 Thursday on Nasdaq.
Metro PCS shares closed down about 9 percent at $16.95 on the New York Stock Exchange. They touched a low of $16.61 earlier. (Additional reporting by Saumyadeb Chakrabarty and Shrutika Verma; Editing by Deepak Kannan, Jarshad Kakkrakandy)