AT&T Wireless Services Inc. said capacity problems and handset shortages constrained the company’s ability to add subscribers in the third quarter.
The nation’s largest wireless operator added 269,000 subscribers in the third quarter, down 17.4 percent from the previous year and down significantly from 473,000 additions in the second quarter. The carrier ended September with 9.2 million customers, 1.65 million of which were Digital One Rate customers.
In comparison, nationwide operators Sprint PCS and Nextel Communications Inc. added 720,000 and 458,000 subscribers, respectively.
“The reasons we launched offers late in the third quarter was because of capacity,” said Dan Hesse, AT&T Wireless chief executive officer. “In some markets, we went almost totally dark from an advertising perspective. We expect [net additions] to come back up, and we’re increasing ad spending.”
AT&T Wireless has struggled with capacity problems all year. The carrier’s introduction of DOR-high-end, flat-rate, anywhere calling plans-last year caused usage to skyrocket across the country, especially in New York. The New York market has been the subject of several media blasts as consumers continue to complain about poor network quality, dropped calls and busy signals. AT&T Wireless said it has increased digital capacity across its network 63 percent since January. In New York, it increased capacity by 125 percent.
AT&T Wireless is improving its cost structure, however. Operating cash flow, excluding other income, reached $404 million in the third quarter, up 22.7 percent from the second quarter.
“Digital One Rate was a major contributor to our profitability improvement, with twice the operating EBITDA per customer than other plans,” said AT&T President John Zeglis.
Zeglis said AT&T Wireless has managed off-network roaming costs aggressively through initiatives such as acquisitions, buildouts, alliances and negotiating better roaming rates. This has resulted in roaming costs per minute falling 20 percent from the previous year and 10 percent lower than the second quarter.
Revenues increased 40.9 percent for the quarter compared with third-quarter 1998, while average revenue per user was $67.90 in the third quarter, the fourth consecutive quarter ARPU increased from the prior year.
Hesse said AT&T Wireless will launch Cellular Digital Packet Data service in Los Angeles today. The company is expected to introduce digital CDPD service by mid-month, offering a Mitsubishi handset that gives customers access to digital voice and data services. Since introducing CDPD PocketNet service in 1997, the carrier has been limited to offering analog handsets in conjunction with the service. Analog handsets and CDPD coverage issues have hampered sales to date, note analysts. Hesse said about 100,000 AT&T Wireless browser handsets are in use today.
Overall, AT&T Corp.’s third-quarter profit fell 15 percent as acquisition expenses increased and revenue growth was impacted by falling long-distance prices. Profit from operations decreased to $1.56 billion, or 48 cents per share, from $1.84 billion, or 68 cents per share, a year ago.
AT&T said it introduced commercial fixed wireless service in the Dallas market and expects a few hundred paying customers by year-end. Zeglis said the company is fine-tuning the service and pricing plans, and AT&T has brought down the costs of the service to match costs of circuit-switched cable telephony. AT&T expects to widely introduce fixed wireless service next year.
AT&T Wireless also announced plans to sell the tri-band Nokia 8860 handset in time for the holiday season. The handset is a chrome phone with a built-in antenna that weighs 4 ounces. AT&T Wireless will sell the phone for $800.
