T-Mobile loses 510K subscribers in Q1, but profits are finally on the rise

T-Mobile is still bleeding subscribers — parent company Deutsche Telekom announced this morning that it lost 510,000 subscribers in the first quarter — but the fourth-place wireless carrier is finally seeing profits once again.

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T-Mobile earnings were up 7.2 percent from last year, reaching $1.3 billion for the quarter, even though revenues fell 2.5 percent at $5 billion. CEO Philip Humm credits the profit jump to an increase in average revenue per user (ARPU), a healthy addition of new customers, and perhaps most importantly, a more streamlined T-Mobile operation after significant layoffs and call center closures.

After its last earnings report in February, T-Mobile announced a $4 billion “Challenger Strategy” to roll out 4G LTE in 2013 — which seemed too little, too late for the struggling carrier. But Humm says the carrier has made great strides with the new strategy, including opening new stores and redesigning existing ones, redefining its brand image with an edgier ad campaign, and nabbing spectrum from Leap Wireless and AT&T (as part of its breakup deal from its failed merger). This week at CTIA, T-Mobile announced that it has tapped Ericsson and Nokia Siemens to help build out its LTE network.

T-Mobile added 249,000 prepaid customers in Q1, compared to prepaid losses of 82,000 a year ago. The prepaid customers helped to offsite the loss in subscribers, though ultimately they’re not worth as much to T-Mobile. Overall, T-Mobile saw 187,000 net customer additions, compared to net customer losses of 99,000 last year. And while losing 510,000 contracted subscribers sounds bad, it’s actually an 11 percent improvement from a year ago (and a 28 percent improvement from last quarter, when it lost 706,000 subscribers).

While things are improving for T-Mobile, it’s going to be tough for the carrier to stem subscriber losses without the iPhone and a legit 4G LTE network in 2012. Deutsche Telekom is reportedly eyeing a merger with MetroPCS, the fifth-largest wireless carrier in the U.S., which could birth a new company that could better take on AT&T and Verizon.