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Prepaid Puts Pressure On Wireless Carriers

T-Mobile, MetroPCS, and Leap pre-paid customers generally pay less for mobile service than contract subscribers.

Mobile phone users are signing up for pre-paid plans in growing numbers, according to fourth quarter figures released this week by three U.S. wireless carriers. The new users, however, although heavily recruited, are putting pressure on the carriers.

T-Mobile USA added 488,000 pre-paid users while MetroPCS and Leap Wireless International signed up 317,000 and 298,000 customers, respectively. Pre-paid customers generally pay less for service than contract subscribers.

As the fourth largest U.S. wireless carrier with 33.8 million customers, T-Mobile didn't gain on the two leading mobile phone carriers, Verizon Wireless and AT&T. The third largest carrier, Sprint Nextel, has been losing customers as it concentrates on deploying its 4G network.

Already under pressure to improve its financials, T-Mobile USA lost 117,000 prized contract customers in the quarter. T-Mobile USA's parent, Deutsche Telekom AG, has been reported to be seeking to change the status of the U.S. unit, possibly in a merger or an IPO as pressure mounts.

T-Mobile USA has scored some points with its new Android smartphones and it has high hopes for its HSPA+ network technology, launched recently in Philadelphia "as the model for a national roll-out."

T-Mobile USA, which ended the quarter with 33.8 million users, reported net income of $306 million and revenue of $5.41 billion. Both figures represent declines -- from $483 million net income and $5.72 in the previous year's quarter.

"T-Mobile USA made significant progress in 2009 in expanding its 3G network, improving its 3G-capable device lineup, enhancing its distribution, and underscoring its value proposition," said Rene Obermann, Deutsche Telekom CEO, in a statement. "This creates a solid foundation to benefit from the robust mobile Internet market."

MetroPCS earned $33 million in the quarter, versus $15 million in the previous year's fourth quarter. Its revenue was $930 million, versus $724 million in the previous year. The company serves primarily urban areas and has often been suggested as an acquirer of Leap Wireless, which is strongest in rural areas.

Leap, which has been reported to be considering a revamping of its corporate status, lost $61.9 million on revenue of $588 million. In the previous year's fourth quarter, Leap lost $55.6 million on revenue of $518.9 million. In 2007, Leap turned down a $5.5 billion acquisition offer from MetroPCS.

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