MetroPCS Communications Earnings Call Nuggets: Upgrade Expenses and T-Mobile Closing

MetroPCS Communications Inc (NYSE:PCS) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Upgrade Expenses

Philip Cusick – JPMorgan: Let’s start with upgrades, can you give me an idea of — historically, upgrades have picked up pretty aggressively from 4Q to 1Q. Would you expect that to happen again this quarter and given how expensive each of the upgrades were, should we see that that mix start to come down a little bit as these 4G phones get a little less expensive or should we expect that per device subsidy to remain high?

Thomas C. Keys – President and COO: Phil, it was fully untrusting looking a little bit at the upgrade rate for the fourth quarter. It came in at 14% of the base compared to 13% of the base in the fourth quarter of 2011, so it was up slightly. Some of our initial estimates were higher from an upgrade standpoint. What was really interesting with the phenomena that we saw here was a rapid acceleration of upgrades throughout the fourth quarter. In December we saw an incredible amount of upgrades and we do accept that trend to continue into at least be at historical upgrade rates for the first quarter. You go back to our messaging earlier in the year, we always said that the 4G LTE For All initiative, the first wave of it would really be upgrades. The fourth quarter was extremely successful in that regard where we increased our LTE subscribers 117% to 26% of the base which was, as Roger said, a remarkable achievement; one of the fastest transitions of technology we believe in the history of wireless. We do expect that acceleration to continue into the first quarter. As Tom mentioned, over 75% of our upgrades were 4G LTE, and from a gross add standpoint over 57% of our mix was 4G LTE. On the subsidy related to 4G LTE handsets is higher than the CDMA handsets which really drove the balance of the increase in retention expense in CPU. Remember, we said it was 562 in the fourth quarter of ’12 versus 436 in the fourth quarter of ’11. We would expect that that differential would continue on into the first quarter. But all in all we’re very, very pleased with what we’re seeing. We’re rapidly migrating our base to a service that customers demand and as we mentioned we have a prepaid churn on 4G LTE that’s lower than some carrier’s postpaid churn. So, we’re very pleased with the momentum that we’re seeing.

Philip Cusick – JPMorgan: Then if I can so far in the first quarter we’ve heard from a number of people that tax rebate season was even more delayed than we’ve seen in the past, but it’s sort of now at a – the business is now at a full run rate, is that similar to what you’ve seen?