Demand For Smartphones Proving Positive For MetroPCS

Deutsche Bank has published a research report on MetroPCS Communications

and has increased estimates on the company following channel checks that showed positive results. In the report, Deutsche Bank writes "We have 2 positive takeaways from our 4Q channel checks for MetroPCS (

), which covered over 80 stores across the company's 14 major markets. (1) Demand remains strong for PCS' prepaid services and we are increasing our 4Q net add estimate to 425k (consensus 393k) from 350k. (2) Rate plan mix continues to improve, which implies that our 2011 ARPU and EBITDA estimates may be conservative. Our improved outlook is based on 3 key findings from our checks. (1) Demand is increasing for 3G and 4G smartphones despite higher price points for the devices (up to $300). (2) PCS' strategy of advertising its $40 plan and then upselling to $45 and $50 plans continues to work (we estimate 95% of sales are at $45 or higher). (3) PCS continues to win post paid converts from the Big 4 carriers, which may be driving over 1/3rd of gross adds (vs. 25-33% of gross adds during 1Q10-3Q10)." Deutsche Bank maintains its Buy rating and has raised the price target from $15 to $20. MetroPCS Communications closed yesterday at $13.07.