MetroPCS Communications Inc.'s (PCS) first-quarter net income rose 11%, fueled by subscriber growth in several key new markets.

MetroPCS, which offers flat-rate pre-paid pricing with regional restrictions, sits in the sweet spot in the industry. More customers are trading down to cheaper plans and avoiding contracts. But the growth has attracted a lot of players, intensifying the competition in this segment.

That's reflected in MetroPCS's lower average revenue per user, suggesting it had to cut prices to stay in contention. Cost cuts, however, helped it to bank higher profits.

"Profitability impressive given subscriber gains," said Goldman Sachs analyst Scott Malat.

MetroPCS posted income of $44 million, or 12 cents a share, up from $39.5 million, or 11 cents a share, a year earlier. There were 5.2% more shares outstanding in the most recent period. The latest results included about $382,000 in write-downs related to hedging; the prior year had $13.9 million.

Revenue increased 20% to $795.3 million on a 29% jump in services revenue and 34% drop in equipment revenue.

Analysts polled by Thomson Reuters expected earnings of 9 cents a share on revenue of $818 million.

Contributing to results were the launches in New York and Boston in the period. MetroPCS blanketed the billboards and airwaves with advertisements ahead of its rollout.

The company said last month subscribership rose 51% from a year earlier, marking a third-straight quarter of growth and another record increase. Net subscriber additions rose to 684,000.

It also said in April that churn, or turnover rate, rose one percentage point to 5%. Average revenue per user fell 5%, the company said Thursday.

MetroPCS backed its estimate for full-year consolidated adjusted earnings before interest, taxes, depreciation and amortization of $900 million to $1.1 billion, as well as subscriber additions of 1.4 million to 1.7 million.

Threatening its forecast are aggressive offers from rival pre-paid players. Sprint Nextel Corp.'s (S) Boost service offers a flat-rate, all-inclusive $50 plan, and added 764,000 new customers in the first quarter.

Virgin Mobile USA Inc. (VM) has also cut its plan to $50 a month, while Leap Wireless International Inc. (LEAP) competes also has some overlapping territories. National player T-Mobile USA has also delved into the pre-paid segment.

MetroPCS' stock rose 0.9% to $18.60 in pre-market action.

-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com

(Kerry Grace contributed to this report.)