The wireless industry’s first full quarter of operating under local number portability provided few surprises as Cingular Wireless L.L.C., Sprint PCS, Nextel Communications Inc. and Alltel Corp. all posted strong customer growth at the expense of AT&T Wireless Services Inc., which posted a significant loss of customers it attributed to back-office software issues and LNP-related customer defections.
While AWS was widely expected to post customer losses during the first quarter due to operational issues as well as consumer questions regarding its pending $41 billion acquisition by Cingular, the reported 367,000 subscribers lost during the first three months of the year was at the high end of forecasts and paled in comparison to the 257,000 customers AWS added in first-quarter 2003.
AWS explained the negative net adds were due to customer churn associated with the first wave of LNP, a higher number than usual of customers not under contract and the residual effect of its fourth-quarter back-office problems with customer care and indirect distribution. AWS reported late last week that customer churn increased from 2.3 percent during the first quarter of 2003 to 3.7 percent this year, while ARPU dropped more than $2 year-over-year to $56.70 resulting in flat service revenue growth of $3.7 billion.
AWS noted that net customer additions improved during the quarter and were nearing breakeven by March, and that it renewed more than 3.5 million customer contracts in the period, which was double the amount of renewals during the first quarter of 2003.
While AWS was struggling through a difficult quarter, future parent company Cingular posted a nearly 200-percent improvement in customer growth during the first quarter-from 189,000 subscribers last year to 554,000 customers this year. Cingular reported the strong growth despite a slight increase in customer churn from 2.6 percent last year to 2.7 percent this year, but added that LNP was having only a minimal impact on its subscriber results.
Cingular said it was not surprised by AWS’ poor quarterly results. “AT&T Wireless’ first-quarter subscriber and revenue numbers, which were released this morning, are consistent with our expectations for the quarter,” said Stan Sigman, president and CEO of Cingular.
Sprint PCS also appeared to have benefited from AWS’ troubles as the carrier surprised many analysts by posting 414,000 direct customer additions during the quarter, which was more than double the 199,000 subscribers Sprint added last year and ahead of predictions of around 200,000 net additions. Bolstering Sprint PCS’ growth was lower-than-expected churn of 2.9 percent during the quarter, compared with estimates in the low 3-percent range and the 3.1 percent the carrier reported during the first quarter of 2003.
Despite lower-than-expected growth through its wholesale channels, Sprint PCS said it added more than 972,000 total subscribers to its network during the first quarter, including its affiliates, and ended the quarter with 21.3 million subscribers.
In addition to its surprising customer growth, Sprint PCS posted a 3.4 percent year-over-year increase in average revenue per user, from $59 during the first quarter of 2003 to $61 this year. The carrier noted more than 55 percent of new subscribers signed up for its Vision data service, bringing the total number of Vision customers to 4.2 million and total data customers to more than 6 million, which the carrier said contributed more than 6 percent to its ARPU results.
Nextel again posted a solid quarter, with 474,000 net customer additions that were in line with analysts’ estimates and on par with the 480,000 subscribers the carrier said it added during the first quarter of last year. Nextel also reported that it signed up 132,000 customers during the first quarter through its youth-oriented Boost Mobile L.L.C. prepaid subsidiary and that it counted approximately 537,000 total Boost subscribers at the end of March.
While Nextel’s customer growth during the first quarter was subdued compared with some of its competitors despite a year-over-year decline in customer churn from 1.9 percent to 1.7 percent, the carrier upgraded guidance for full-year net additions from 1.8 million to 1.9 million, and said it expects to take its fair share of customers during the rest of the year.
Alltel also posted modest customer growth during the quarter with total subscriber additions dropping slightly, from 159,251 customers during the first quarter of 2003 to 157,741 subscribers this year, though last year’s results included nearly 111,000 customers added through acquisitions. Fueling Alltel’s strong internally generated customer growth was a 12-percent increase in gross customer additions and a decrease in customer churn from 2.66 percent during the first three months of 2003 to 2.4 percent this year.
