TracFone adds just 5,000 subs in Q3 as subscriber growth grinds to a halt

América Móvil's U.S. MVNO, TracFone Wireless, reported just 5,000 net subscriber additions in the third quarter, compared to 302,000 in the year-ago period. The carrier's figures also come on top of its 192,000 net subscriber losses in the second quarter, which were pinned on a company-wide effort within the parent firm to shut off the service of inactive users.

As it did in the second quarter, TracFone reported that its net subscriber totals came in "after disconnections resulting from the revaluation of the conditions of certain commercial plans." It is not clear what that exactly means or what plans the company is referring to.

A TracFone spokesman referred questions on the matter to América Móvil, and América Móvil representatives did not immediately respond to a request for comment.

TracFone ended the quarter with 23.04 million total customers. The company posted revenue in the period of $1.49 billion, up 17.2 percent year-over-year. The company's average revenue per user was $20, up 10.7 percent from $18 in the year-ago period.

TracFone acquired T-Mobile US (NYSE:TMUS) MVNO Simple Mobile and its 1 million customers in the spring of 2012. The company said that the acquisition has now filtered through its earnings reporting. "The rate of revenue growth has normalized: over the last four quarters it had been driven up by the consolidation of Simple Mobile in late June 2012," the company said. "This time around, the quarter's revenue growth is completely organic." TracFone also acquired Start Wireless' Page Plus Cellular, a Verizon Wireless MVNO that counted around 1.4 million customers in the United States, in May, though that deal has not yet closed.

Further, TracFone said data revenues continue to expand, growing 50 percent year-over-year in the third quarter. Data revenues now represent 42.5 percent of TracFone's total service revenues, which clocked in at around $1.37 billion in the quarter.

Several weeks ago, as part of its ongoing effort to clean the Lifeline program of waste and fraud, the FCC came down hard on five carriers that use the service, including TracFone, and proposed around $14.4 million in fines against the companies accused of breaking the commission's rules.

The commission said the actions, formally known as Notices of Apparent Liability (NALs), were brought against Icon Telecom, which faces $4.8 million in forfeitures; TracFone ($4.57 million); Assist Wireless ($2.2 million); Easy Telephone Services, which operates as Easy Wireless ($1.58 million); and UTPhone ($1.23 million). The FCC said the violations involved thousands of consumers who had more than one Lifeline subscription from the same carrier, resulting in duplicative support requests and payments.

In a statement released shortly after the FCC announced its actions, TracFone said the FCC is disputing TracFone Lifeline wireless billing involving less than $8,000 and involving fewer than 850 people. "With almost 4 million Lifeline customers, obviously this is a very small percent," the company said.

"We do not believe that our conduct violated any rules or that the proposed FCC action is warranted," TracFone said at the time. "We believe that we have the most sound program in the industry when it comes to wireless Lifeline."

For more:
- see this release (PDF)

Special Report: Wireless in the third quarter of 2013

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Article updated Oct. 25 at 4:55 p.m. ET to clarify that TracFone's Start Wireless transaction has not yet closed.