MetroPCS Communications Inc. ( ) reported third-quarter 2012 earnings per share of 52 cents that topped the Zacks Consensus Estimate of 26 cents and shot up 173.7% from 19 cents in the year-ago quarter.

Total revenue climbed 6% year over year to $1,259.2 million in the third quarter, beating our expectation of $1,253 million. Adjusted EBITDA spiked 42% year over year to $466 million. The company generated record EBITDA margin (adjusted EBITDA as a percentage of service revenues), which increased by a whopping 1260 basis points (bps) to 41.5%.

Operational Metrics

Average revenue per user (ARPU) was $40.5 in the reported quarter compared with $40.8 in the year-ago quarter. Cost per user (CPU) dipped 5.8% year over year to $18.38.

Cost per gross addition (CPGA) crept up 4.3% year over year to $202.24. Churn (customer switch) was 3.7% in the third quarter, decreased 80 bps from the prior-year quarter.

Subscriber Statistics

MetroPCS lost 312,291 subscribers during the quarter compared to subscriber addition of 69,384 in the year-ago quarter. Total subscriber base at the end of the reported quarter was 8.98 million customers (down 2% year over year). Consolidated penetration of the covered population was 8.8% against 9.1% in the prior-year quarter.

Liquidity

The company ended the third quarter with cash and cash equivalents (inclusive of short term investment) of $2,565.2 million compared with $2,243.2 million at the end of the year-ago quarter. Quarterly long-term debt was $4.731 billion compared with $4.711 billion in the comparable quarter last year.

Guidance

For fiscal 2012, MetroPCS maintained its prior expectation of capital expenditures in the range of $0.9 billion to $1.0 billion.

Our Analysis

MetroPCS remains hopeful that the launch of its 4G LTE for All program will enable it to add subscribers in near future. The company expects to further expand its LTE services, which currently serves 8% of its existing subscriber base. With faster broadband speed the company aims at fulfilling the growing demand for data services. Further, the stellar operating performance in terms of record adjusted EBITDA and EBITDA margin remains encouraging despite substantial subscription losses. Moreover, the company plans to merge with T-Mobile USA, which will not only solve the company’s spectrum shortage issue but at the same time will help them to cover huge footprints across the U.S.

However, we remain cautious on associated expenditures on expansion plans that may weigh over the margins. Further, the company faces stiff competition from peers like United States Cellular ( USM - Analyst Report ) .

We are currently maintaining our long-term Outperform rating on MetroPCS, supported by a Zacks #3 Rank (Hold).