T-Mobile US reported subscriber growth that blew past analysts' expectations as it ended four years of customer losses with a big marketing push and its launch of the Apple Inc iPhone, sending its shares up almost 5 percent.
But the customer growth came at the cost of heavy spending on marketing, which weighed on its financial results. Its parent company, Deutsche Telekom AG, which owns 74 percent of T-Mobile US, said it would plow more money into the No. 4 U.S. mobile provider to help it continue to grow.
T-Mobile US on Thursday said it added a net 688,000 contract customers in the second quarter, including wireless broadband customers and phone users, well ahead of an average forecast of 140,000 from four analysts, whose estimates ranged from 33,000 to 254,000.
Bigger rival AT&T Inc added just over 550,000 subscribers in the quarter, while Sprint Corp lost 1.045 million contract customers as it shut down its Nextel network.
T-Mobile US Chief Executive John Legere told CNBC that his company's growth was helped by customer defections from AT&T. In its marketing, T-Mobile US often compares its prices and policies to those of AT&T.
"We're taking customers from AT&T at a ratio of two to one," Legere said in the television interview. "They're in complete fight-back mode, and I find it more humorous every day."
AT&T tried to buy T-Mobile in 2011 but the deal was blocked by U.S. regulators. Since then the companies have been competing with each more viciously than ever.
While New Street analyst Jonathan Chaplin was impressed with T-Mobile US' customer growth, he questioned whether it would be able to keep up the pace.
"The question remains as to whether TMUS can sustain the performance in postpaid as the iPhone buzz fades and competitive intensity rises," Chaplin said in a research note.
Customer growth helped boost the company's revenue, but T-Mobile US had to spend heavily on marketing to attract new users.
The company, which merged with smaller rival MetroPCS in April, said that including MetroPCS, adjusted second-quarter earnings before interest, tax, depreciation and amortization (EBITDA) dropped 30 percent from a year earlier to $1.3 billion.
Chaplin said he had expected $1.33 billion.
T-Mobile US, which last recorded subscriber growth in the first quarter of 2009, set a target for 2013 net subscriber additions of between 1 million and 1.2 million.
Citi analyst Michael Rollins said that target suggests a slowdown in growth from the second quarter.