United States.

Customer development.

Contract customers.*
(’000)
Contract customers(’000)
Prepay customers.* (’000)
Prepay customers.* (’000)
* Prior-quarter amounts have been restated to conform to current-period customer reporting classifications.
  Sept. 30,
2012

thousands
June 30,
2012

thousands
Change
Sept. 30, 2012/
June 30, 2012
%
Dec. 31,
2011

thousands
Change
Sept. 30, 2012/
Dec. 31, 2011
%
Sept. 30,
2011

thousands
Change
Sept. 30, 2012/
Sept. 30, 2011
%
 
United States              
Mobile customers 33,327 33,168 0.5 33,186 0.4 33,711 (1.1)
Contract customers 23,763 24,087 (1.3) 24,797 (4.2) 25,598 (7.2)
Branded 20,809 21,300 (2.3) 22,367 (7.0) 23,074 (9.8)
Machine-to-machine (M2M) 2,954 2,787 6.0 2,430 21.6 2,524 17.0
Prepay customers 9,564 9,081 5.3 8,389 14.0 8,113 17.9
Branded 5,659 5,295 6.9 4,819 17.4 4,599 23.0
MVNOs 3,905 3,786 3.1 3,570 9.4 3,514 11.1
 
At September 30, 2012, the United States operating segment (T-Mobile USA) had 33.3 million customers, a net increase in customers of 141,000 compared to 33.2 million customers at December 31, 2011. This increase in net customers in the first nine months of 2012 was an improvement compared to a net decrease of 24,000 for the first nine months of 2011. In the first nine months of 2012, prepay customer growth more than offset contract customer losses. In the first nine months of 2012, T-Mobile USA lost 1,034,000 contract customers compared to 849,000 contract customers lost in the first nine months of 2011. In the first nine months of 2012, branded contract customer losses were impacted by a decline in branded gross customer additions partially offset by lower branded contract customer churn, which continues to be a key strategic focus for 2012. Additionally, total machine-to-machine customers continued to grow in the first nine months of 2012, although at a slower rate than the first nine months of 2011, to a total of 3.0 million customers at September 30, 2012. In the first nine months of 2012, T-Mobile USA had 1,175,000 net prepay customer additions compared to 825,000 net prepay customer additions in the first nine months of 2011. The significant improvement in net branded prepay customer additions in the first nine months of 2012 was due to the continued success of unlimited Monthly 4G prepay plans and customer migration to prepay plans due to the discontinuation of the Company’s FlexPay product that historically had higher churn. Additionally, MVNO customers continued to grow in the first nine months of 2012, and totaled 3.9 million at September 30, 2012.
T-Mobile USA’s blended churn decreased to an average of 3.3 percent per month in the first nine months of 2012, compared to an average of 3.4 percent per month in the first nine months of 2011. The year-on-year decrease in blended churn was due primarily to lower branded contract churn from a change in the mix of T-Mobile USA’s contract product portfolio and the continued strategic focus on churn reduction. Compared to the prior period, branded contract churn decreased by 0.3 percentage points to 2.3 percent. In order to improve the contract product portfolio, the Company discontinued certain products that had higher churn, such as FlexPay Contract, and introduced the new “Unlimited 4G data” plans in September. The continued strategic focus on churn reduction, including credit optimization initiatives, also contributed to the decrease.
Development of operations.
  Q1
2012
millions of €
Q2
2012
millions of €
Q3
2012
millions of €
Q3
2011
millions of €
Change

%
Q1 – Q3
2012
millions of €
Q1 – Q3
2011
millions of €
Change

%
FY
2011
millions of €
 
Total revenue 3,847 3,816 3,915 3,683 6.3 11,578 10,963 5.6 14,811
Profit (loss) from operations (EBIT) 344 396 (10,108) 976 n.a. (9,368) 2,245 n.a. (710)
EBIT margin % 8.9 10.4 n.a. 26.5   (80.9) 20.5   (4.8)
Depreciation, amortization and impairment losses (561) (640) (11,241) n.a. (12,442) (463) n.a. (4,407)
EBITDA 905 1,036 1,133 976 16.1 3,074 2,708 13.5 3,697
Special factors affecting EBITDA (78) (22) 139 (49) n.a. 39 (80) n.a. (134)
EBITDA (adjusted for special factors) 983 1,058 994 1,025 (3.0) 3,035 2,788 8.9 3,831
EBITDA margin (adjusted for special factors) % 25.6 27.7 25.4 27.8   26.2 25.4   25.9
Cash capex (571) (425) (865) (527) (64.1) (1,861) (1,550) (20.1) (1,963)
 
Total revenue.
Total revenue for the United States operating segment (T-Mobile USA) was EUR 11.6 billion in the first nine months of 2012, an increase of 5.6 percent compared to EUR 11.0 billion in the first nine months of 2011 due to fluctuations in the currency exchange rate. In U.S. dollars, total revenue declined by 3.8 percent year-on-year due primarily to a decrease in service revenues partially offset by an increase in equipment revenues associated with T-Mobile USA’s Value plans and other fee revenues. Service revenuesInfo declined due to a decrease in branded contract customers (contract customers excluding machine-to-machine) and changes in the customer mix towards lower priced Value rate plans. This was partially offset by strong prepay service revenue growth associated with the continued success of unlimited Monthly 4G prepay plans introduced in the second quarter of 2011. Data service revenues increased by 7.3 percent in the first nine months of 2012 compared to the prior year driven by increased smartphone plan adoption. Equipment sales increased, despite lower volumes, by 15.5 percent due to handset program pricing changes in connection with T-Mobile USA’s Value plans, which were launched in the third quarter of 2011.
EBITDA, adjusted EBITDA.
EBITDA increased in the first nine months of 2012 by 13.5 percent to EUR 3.1 billion compared to EUR 2.7 billion in the first nine months of 2011. Adjusted EBITDA increased in the first nine months of 2012 by 8.9 percent to EUR 3.0 billion compared to EUR 2.8 billion in the first nine months of 2011 due to fluctuations in the currency exchange rate. Adjusted EBITDA for the first nine months of 2012 excludes EUR 0.1 billion in expenses associated with organizational restructuring initiatives and the terminated AT&T acquisition of T-Mobile USA. Additionally, adjusted EBITDA for the first nine months of 2012 excludes a EUR 0.1 billion gain recognized on an AWS spectrum license transaction. In U.S. dollars, adjusted EBITDA decreased by 0.9 percent primarily due to a decline in service revenues as described above partially offset by lower equipment subsidies in connection with handset program pricing changes from T-Mobile USA’s Value plans and lower equipment unit sales volumes. Additionally, lower employee-related expenses and the effects of ongoing cost management programs contributed to a decline in expenses in the first nine months of 2012. This combined reduction in costs was partially offset by higher bad debt expense related to certain customer groups.
EBIT.
EBIT declined due to an operating loss of EUR 9.4 billion in the first nine months of 2012 compared to an operating profit of EUR 2.2 billion in the first nine months of 2011 due to an impairment loss of EUR 10.6 billion on goodwill, other intangible assets and property, plant and equipment. See section “Depreciation, amortization and impairment losses” under “Other disclosures” in the interim consolidated financial statements on pages 37 and 38 for more information regarding the impairment assessment. Additionally, in the first nine months of 2011, EBIT was higher as the result of the discontinuation of depreciation and amortization (EUR 1.1 billion, IFRS 5) in connection with the held-for-sale classification of T-Mobile USA’s non-current assets in relation to the terminated sale to AT&T. In March 2011, T-Mobile USA discontinued depreciation of these assets for accounting purposes as of the announcement of the proposed transaction. The classification as a discontinued operation was reversed as of the end of the 2011 financial year and depreciation and amortization discontinued in the course of the year was retrospectively recognized in the fourth quarter of 2011. Also, in the first nine months of 2012, T-Mobile USA recorded EUR 0.2 billion in accelerated depreciation related to network modernization initiatives.
Cash capexInfo.
Cash capex increased 20.1 percent year-on-year to EUR 1.9 billion in the first nine months of 2012 compared to EUR 1.6 billion in the first nine months of 2011. In U.S. dollars, cash capex increased 9.0 percent year-on-year due to higher incurred capex in 2012 related to the network modernization transformation and the purchase of spectrum licenses, partially offset by payment timing. In the first nine months of 2012, T-Mobile USA announced that it will invest USD 4 billion in total to strengthen its 4G network, as well as refarming of 1,900 MHz spectrum previously used for GSM for HSPA+ beginning in 2012 and the planned launch of LTE technology in 2013. Additionally, T-Mobile USA recognized a USD 1.2 billion non-cash increase of AWS spectrum received as a result of the terminated AT&T transaction.