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By Ingrid Lunden

t-mobile

T-Mobile USA's parent Deutsche Telekom (OTCPK:DTEGF) today reported earnings for the quarter that ended March 31, with revenues and earnings in slight decline compared to a year ago: sales for the carrier came in at €14.4 billion, a decline of 1.1 percent; and earnings of €4.48 billion ($5.8 billion) were down by 0.1 percent. Both figures, however, still managed to beat forecasts from analysts polled by Bloomberg.

With the future of T-Mobile USA still in play - there are reports that the carrier may be merged with MetroPCS, in the wake of T-Mobile's merger with AT&T getting scuppered by regulators - Deutsche Telekom noted in a separate release that the carrier performed well with earnings up by eight percent to $1.3 billion (€1 billion) even as revenues were down by 2.3 percent to $5 billion. And customer retention issues still persist at the carrier - the last major mobile operator in the U.S. not offering the popular iPhone: it lost over half a million (510,000) contract subscribers in the quarter.

And that loss in higher-value contract customers was not offset by gains in lower-value prepay subscribers, which grew only by 187,000. Still, Philipp Humm, the chief executive of T-Mobile USA, noted that the contract churn is the company's lowest-yet in seven quarters.

DT says T-Mobile USA is "well on schedule" in its $4 billion LTE migration for 2013 - a big part of the company's bid to refresh the T-Mobile brand under its so-called "Challenger Strategy". It's building that 4G network using spectrum it picked up from AT&T (NYSE:T) as a consequence of that deal falling through, and adding to it by refarming some of its own older spectrum. As part of DT's relaunch of the network, the company also says it plans to expand its sales and marketing activities.

Despite the loss of contract subscribers, T-Mobile is managing to make some good gains in the U.S. ARPU was up slightly to $58 from $56 a year ago. Although it noted in its release that it was the first carrier to offer a Lumia smartphone from Nokia in the U.S., it did not give out details on how well it sold.

DT is also trying to look to the future and build out new services, like its multi-screen entertainment business, in a bid to further offset declines in its traditional retail phone business. In Germany, "Entertain," as DT's TV service is called, now has 1.7 million subscribers, the company says, up 37.2 percent compared to last year, with 173,000 new customers picked up in the quarter. DT's approach with TV has been one of multiple technologies, and in Q1, 81,000 of those new subscribers actually look a satellite-based rather than fiber-based service.

DT's home market remains the single-biggest operation for the company with revenues of €5.7 billion ($7.4 billion). Overall that figure was down by "only" 2.3 percent, with the decline fuelled by strong competition in both mobile and broadband services, but slowed by a strong performance in wholesale. Overall mobile revenues were down by 1.8 percent in Germany, although mobile data revenues grew by 20 percent to €462 million.

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Source: Deutsche Telekom Q1: 510,000 Contract Customers Left T-Mobile USA