By Arathy S Nair and Malathi Nayak
(Reuters) - T-Mobile US Inc (TMUS.O) on Tuesday reported lower-than-expected quarterly revenue and profit, hurt by the No. 3 U.S. wireless carrier's initiatives such as lower-priced plans to attract monthly users away from competitors.
T-Mobile shares, which have risen about 54 percent this year, fell 7.1 percent to $38.44 in afternoon trading on the Nasdaq.
T-Mobile's branded postpaid average revenue per user (ARPU) fell to $47.99 in the third quarter ended Sept. 30, from $49.84 a year earlier, and net customer additions were flat at 2.3 million.
"If T-Mobile is getting more customers on family plans, which offer a discount on incremental lines ... those incremental lines have lower access charges and that has an impact on ARPU," BTIG analyst Walt Piecyk said.
T-Mobile has discounted some pricing plans, increased data allotments and introduced a $5 trade-in plan for Apple Inc's (AAPL.O) iPhone 6. It has also added perks such as free music streaming to woo customers away from bigger rivals Verizon Communications Inc (VZ.N) and AT&T Inc (T.N).
Family plans bring some pressure on ARPU but they have helped T-Mobile gain subscribers from rivals and will help retain customers, Chief Financial Officer Braxton Carter said in an interview.
The plans "have a much higher customer lifetime value and is very accretive to the company because there is a better retention profile and a much lower acquisition cost for the entire family unit," Carter added.
On Tuesday, the company raised its 2015 guidance for net additions for the third time this year. It said it now expects to add 3.8 million to 4.2 million postpaid users, or customers who pay on a monthly basis based on usage, up from 3.4 million to 3.9 million it had forecast earlier.
T-Mobile said it continues to expect "positive earnings going forward" and reported $411 million in free cash flow in the quarter.
The company generated free cash flow for the first time, as it "added postpaid (or monthly) subscribers more than any other wireless operator in the industry," BTIG's Piecyk said.
T-Mobile reported net income of $138 million, or 15 cents per share, for the third quarter, compared with a loss of $94 million, or 12 cents per share, a year ago.
Analysts, on average, had expected a profit of 30 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose 6.8 percent $7.85 billion, but missed analysts' average estimate of $8.29 billion.
(Reporting reporting by Arathy S. Nair in Bengaluru and Malathi Nayak in New York; Editing by Toni Reinhold and David Gregorio)