Following a competitive first quarter that witnessed the wireless industry meeting modest customer addition expectations, moderating customer churn results and a drop in customer revenue, analysts and investors are hinting that the wireless industry should report slightly improved results during the recently completed second quarter.
Investors used the past three months to move back into the wireless space. Nearly all of the publicly traded wireless carriers saw their stock prices climb substantially during the period, with some operators witnessing a more than 400-percent improvement in their share price.
Of the publicly traded nationwide operators, AT&T Wireless Services Inc.’s stock price shot up more than 25 percent during the second quarter, while Nextel Communications Inc. posted a 34-percent increase and Sprint PCS’ tracking stock jumped 34 percent from April 1 to June 30.
A number of regional players saw even larger increases in stock prices, lead by Airgate PCS Inc.’s 445-percent increase from 22 cents on April 1 to $1.20 on June 30; Rural Cellular Corp.’s 394-percent stock price increase from 85 cents to $4.20; and Alamosa Holdings Inc.’s 325-percent increase from 36 cents to $1.53.
As analysts look at the second quarter, Verizon Wireless and T-Mobile USA Inc., the country’s largest and smallest nationwide operators respectively, are again expected to lead the industry in customer growth. Analysts note Verizon Wireless continues to attract customers seeking a high quality network, while T-Mobile USA attracts wireless subscribers looking for the best value.
Retail channel checks by analysts during the quarter found that both carriers maintained new customer interest, though there is some concern that T-Mobile USA’s strong growth over the past several quarters could see a similar slide to what Sprint PCS experienced last year when it increased credit requirements on some customer segments.
Nextel again is expected to post steady quarterly customer growth, with analysts predicting the carrier will report about 450,000 net customer additions during the quarter. While those predicted results would be below the 471,000 subscribers the carrier added during the second quarter of 2002, they would put Nextel on pace to meet its full-year guidance of 1.7 million subscriber additions.
AT&T Wireless and Sprint PCS are both expected to report approximately 350,000 net customer additions during the second quarter, which would be a drop from the 417,000 customers AT&T Wireless added in the same quarter last year, but an improvement for Sprint PCS, which posted 308,000 additions in second-quarter ’02.
Analysts voiced concern during the quarter that AT&T Wireless was beginning to see an impact from continuing GSM network coverage issues, though the carrier’s no-contract GoPhone service was expected to attract its fair share of credit-challenged customers.
On the other hand, Sprint PCS appears to be making progress on adding higher quality customers to its network after posting a loss of customers during the third quarter of 2002 that was caused by a spike in customer churn after changing credit requirements on its Clear Pay program. Since then, Sprint PCS has reported a steady increase in customer additions and, more importantly, a drop in customer churn, which Sprint PCS President Len Lauer said he expects to be around the 2.75-percent level throughout the rest of 2002.
Similar to Sprint PCS, Cingular Wireless L.L.C. is also expected to post slightly improved second-quarter results compared with the first quarter of this year following two quarters of customer losses to end 2002. Analysts cautioned that mid-quarter retail channel checks were relatively flat and that a drop in indirect channel sales may not be offset by increased sales in direct channels.
ARPU, which took a hit during the first quarter, will be watched closely. UBS Warburg said the first quarter typically is the “low-water mark” for ARPU due to a short February and colder weather, adding that over the past two years ARPU had increased approximately $2 sequentially during the second quarter.