T-Mobile USA adds mostly prepaid subscribers in 3Q

Prepaid customers are more likely to cancel service and pay less than "postpaid" customers, who have contracts. The latter are generally seen as more desirable for carriers.

T-Mobile USA added 670,000 net new customers in third quarter, of which 44 percent were on contracts. That's down from 80 percent in the second quarter and 65 percent in the third quarter last year.

In contrast, at AT&T Inc., the country's largest wireless carrier, people with contracts accounted for 85 percent of the subscribers added in the quarter. Most of the 377,000 prepaid customers T-Mobile USA added were on new FlexPay plans that lack contracts but have some of the same features, such as a monthly bucket of minutes and free calls on nights and weekends.

T-Mobile USA, which is a subsidiary of German telecommunications titan Deutsche Telekom AG, ended the quarter with 32.1 million subscribers. T-Mobile's prepaid customers paid an average of $24 per month, while contract customers paid $52.

T-Mobile USA had a harder time holding on to its contract customers in the quarter. "Churn," or the number of subscribers who cancel each month, rose to 2.4 percent, up from 2 percent a year ago. Those figures are higher than at market leaders AT&T and Verizon Wireless. T-Mobile USA said the increase was due to customers reaching the end of their first two-year contract, which was introduced in April 2006. Competition also played a role.

Revenue rose 13 percent from a year ago to $5.51 billion. Net income was $442 million, down 16 percent.