MetroPCS shares down on new phone discount

AP News
Posted: Feb 29, 2012 1:13 PM
MetroPCS shares down on new phone discount

Shares of MetroPCS Communications Inc., the country's fifth-largest cellphone company, fell Wednesday after it said it would introduce a $30 mail-in rebate for new phones.

THE SPARK: On Tuesday, Chief Operating Officer Thomas Keys said the company would institute the mail-in rebate starting on Thursday to keep sales coming. State tax refunds have been delayed in some areas, making MetroPCS's customers more cautious, he said.

The company markets prepaid, flat-rate service, mainly to poorer households in urban areas.

THE ANALYSIS: UBS analyst John Hodulik downgraded MetroPCS share to "Neutral" on Wednesday, saying he expects higher costs to acquire subscribers to persist through the year. Increasing competition and higher gas prices, which weigh heavily on low-income households, also darken the outlook, he said.

He cut his price target on the shares to $11 from $15.

SHARE ACTION: The shares fell 72 cents, or 6.5 percent, to $10.30 in afternoon trading. The stock gave back nearly all of the boost it got after MetroPCS released fourth-quarter results on Thursday. That report had indicated the company was keeping tight lid on marketing expenses.