* Promises more offers to attract rivals' customers
* Says defections from AT&T, Sprint continued in July
By Sinead Carew
NEW YORK, Aug 8 (Reuters) - T-Mobile US on Thursdayreported second-quarter subscriber growth that blew pastanalysts' expectations and ended four years of customer losses,boosted by a big marketing push and its launch of Apple Inc's iPhone.
Heavy spending on marketing weighed on the company'sfinancial results, but its corporate parent, Deutsche Telekom AG, said it would plow more money into the No. 4 U.S.mobile provider to help it continue to grow.
T-Mobile US shares were up 2.95 percent in afternoontrading.
Amid increasingly tough competition in the U.S. mobilemarket, T-Mobile US is battling much bigger rivals VerizonWireless , AT&T Inc and Sprint Corp.
Chief Executive John Legere said T-Mobile US' growth in thesecond quarter was helped by customer defections from Sprint andAT&T, and he said the trend was continuing in the third quarter.He pledged to ramp up his battle plan with a new offering aimedat luring more customers from rivals.
"It's going to solve another customer pain point and it'sgoing to unveil another weakness with major players," Legeresaid in a conference call with analysts. He declined to givedetails about the plan but said it would come soon.
T-Mobile US said it added a net 688,000 contract customersin the second quarter, including wireless broadband customersand phone users, well ahead of the average estimate for 140,000from four analysts.
By comparison, AT&T added just over 550,000 subscribers inthe quarter, while Sprint lost 1.045 million contract customersas it shut down its Nextel network. In its marketing, T-MobileUS often compares its prices and policies to those of AT&T.
Legere said he was not worried about efforts by rivals tofight back, saying AT&T was "in full fight-back mode" already.AT&T tried to buy T-Mobile US in 2011 but the deal was blockedby U.S. regulators. Since then, competition between thecompanies has intensified.
Some analysts are worried that Sprint, the No. 3 U.S. mobileoperator, could become a more formidable rival in the future asJapan's SoftBank Corp - a tough competitor in its homemarket - has taken a 79 percent stake in Sprint.
New Street analyst Jonathan Chaplin was impressed withT-Mobile US' customer growth, but he questioned whether it wouldbe able to keep up the pace.
"The question remains as to whether TMUS can sustain theperformance in postpaid as the iPhone buzz fades and competitiveintensity rises," Chaplin said in a research note.
DISH PROSPECTS
T-Mobile US reported its results two days after CharlieErgen, chairman of satellite TV company Dish Network,said T-Mobile US was a possible acquisition target.
Legere said he was willing to take a look "if in fact(Ergen) wants to discuss it," but added he does not urgentlyneed a deal.
"We're not sitting there waving a flag saying we needsomebody to save us," Legere told Reuters in an interview. "It'scertainly not something I'm sitting here panting over and caringone way or the other whether he put us in the top of hislist..."
EBITDA DECLINE
Analysts said T-Mobile US' growth prospects are notguaranteed. While customer growth boosted revenue in the secondquarter, T-Mobile US had to spend heavily on marketing toattract new users.
The company, which merged with smaller rival MetroPCS inApril, said that including MetroPCS, adjusted second-quarterearnings 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 thefirst quarter of 2009, set a target for 2013 net subscriberadditions of between 1 million and 1.2 million.
Citi analyst Michael Rollins said that target suggests aslowdown in growth from the second quarter.
"We believe second-quarter headline results could be as goodas it gets for a little while," Rollins said in a research note.
For the full year 2013, T-Mobile US reduced its target for adjusted EBITDA to a range of $5.2 billion to $5.4 billion fromits December target of $5.8 billion to $6 billion. ChiefFinancial Officer Braxton Carter told analysts the decline wasdue to increased spending required to fuel subscriber growth.
T-Mobile US forecast capital expenditures of $4.2 billion to$4.4 billion for 2013.
The company reported a net loss of $54 million, or 2 centsper share, for the second quarter, compared with a profit of$175 million, or 39 cents per share, a year earlier.
Revenue rose 27.5 percent to $6.23 billion, primarily due tothe inclusion of MetroPCS results and record smartphone sales.
Earlier this year, T-Mobile US eliminated phone subsidiesand set up phone installment payment plans for its customers,with the idea that customers might upgrade their phones moreoften.
AT&T and Verizon Wireless have followed suit, touting theirown version of T-Mobile US' offer of more frequent phoneupgrades, but they have been criticized for effectivelycharging customers twice for their phones in exchange for moreupgrades.
Including pre-paid and wholesale customers, T-Mobile USrecorded net additions of 1.1 million customers in the secondquarter.
Shares of T-Mobile US, which is 74 percent-owned by DeutscheTelekom, were up 71 cents at $24.72 in afternoon trading on theNew York Stock Exchange.
Vodafone (VOD)
