T-Mobile's growth focusing on 3G

T-Mobile USA saw both its subscriber growth slow and its churn increase in the fourth quarter, but its new 3G network made its first big impact on customer number. T-Mobile said about 20% of the phones sold in the fourth quarter to contract customers were 3G smartphones like the G1 Android phone and the Samsung Behold, converged data devices that come with pricier data plans and higher revenues per user.

Still, those 3G devices weren’t enough to boost its net adds in what is normally a big quarter for the wireless operators. While AT&T posted net adds of 2.1 million and Verizon Wireless, 1.4 million, in the holiday quarter, T-Mobile’s subscriber additions fell to 621,000, compared to 951,000 it added a year previous. What’s more, T-Mobile’s contract customer additions fell to 267,000 or 43% of its net additions, compared to 733,000 of overall adds year-over-year. In short, not only has T-Mobile’s growth slowed, what growth it does have is being driven more and more by lower-revenue prepaid customers. T-Mobile is also having trouble keeping the higher-revenue customers it does have: Contract churn jumped to 2.4% from 1.8% a year ago, as a spate of 2-year contracts first introduced in 2006 came to an end.

T-Mobile is keeping faith with its new 3G strategy though, according to Chief Executive Officer Robert Dotson, who said the new network will give T-Mobile growth in two trajectories: new subscribers lured by fancy 3G smartphones and higher revenues per customer, driven by data plans. T-Mobile didn’t report any average revenue per subscriber (ARPU) numbers today or break out data from voice revenues. Its full financials will come to light on February 27 when parent company Deutsche Telekom reports its fourth-quarter earnings.

The G1 smartphone was introduced in the US in late October, making the fourth quarter the first to record its sales. Though T-Mobile hasn’t reported any specific sales data on the G1, its penetration was limited. Initially T-Mobile sold the phone in 3G markets, which at the end of the year was in 28 major markets covering 100 million people. The operator, however, began selling the G1 in all of its retail stores in 2G markets last week, greatly expanding its reach, though customers in 2G markets will only have access to the slower EDGE network.

Speaking at the ATIS LTE conference earlier this week, T-Mobile senior vice president of engineering of operations Neville Ray said that the customers buying the G1 are using data services in record volumes: the average G1 user consumes 50 times the data of the average voice-centric phone user and 6 times that of the average feature or smartphone user.