T-Mobile signs on 3G customers, but starts losing them in 2G

As T-Mobile USA (NYSE:DT) expands its 3G footprint and smartphone portfolio, its 3G subscriber base is starting to ramp up. The smallest of the Tier I operators reported a 33% increase in 3G handset and data subscribers from the fourth to the first quarters, for a total of 5.2 million 3G subscribers, and an 18% increase in data revenues to $1.1 billion.

Despite those gains on the high end, though, T-Mobile saw its overall customer base decline by 77,000 customers and its overall average revenue per user (ARPU) decline from $48 to $46 year over year. In short, T-Mobile is raking in new smartphone and data feature phone subscribers, but it’s having trouble hanging on to its established voice customers, as they flee to the other nationwide operators and the competitive prepaid plans of smaller operators such as Leap Wireless (NASDAQ:LEAP) and MetroPCS (NYSE:PCS).

T-Mobile’s contract subscribers fell 118,000 in Q1, consistent with the pervious quarter but actually lower than its contract subscriber losses in the first quarter of 2009, which totaled 160,000. Last quarter, though, T-Mobile suffered a hit in its prepaid and wholesale businesses, which have carried it into positive growth in previous quarters. In the fourth quarter it added 488,000 prepaid and MVNO customers, but last quarter it brought in only 41,000 net additions. Overall APRU was down, as T-Mobile’s overall customer mix shifts from postpaid to prepaid, but other factors were at play. Increasing data revenues were offset by declining voice revenues. Meanwhile, T-Mobile’s growing machine-to-machine business, while adding more connections to the network, contributed far less revenue per subscriber.

T-Mobile’s high-speed packet access (HSPA) 3G network covered 208 million pops by the end of the first quarter, and it appears to be over the hump in its major capital expenditures for the network. It spent $666 million on capex in Q1, compared to $697 million in Q4 and $1.13 billion in Q1 of 2009, most of which went to building the new network and upgrading it to support speeds of 7.2 Mb/s. T-Mobile is expected to plow more money into the network this year as it upgrades to HSPA+, which will triple download speeds.

T-Mobile also announced it will launch its new Garmin-powered Android navigation phone in June, selling it for $200 with a two-year contract including data plan.