Tier-two wireless carriers reported diverse second-quarter financials. Dobson Communications Corp., the nation’s ninth largest carrier, saw its stock plunge on full-year guidance, while No. 10 Leap improved its metrics as it gets closer to emerging from bankruptcy protection.
Dobson reported mixed operating and financial results for the second quarter, forcing the rural carrier to revise downward its full-year guidance and sending the carrier’s stock down more than 50 percent in early Tuesday trading.
Dobson’s stock plunged more than 50 percent following the news to as low as $1.02 per share, which is a new 52-week low and a fraction of the $8 per share it closed at in mid-January.
Dobson posted $252.4 million in revenues during the second quarter, which was a 75.9-percent improvement compared with the $143.5 million the carrier reported during second-quarter 2003. Most of the increase was attributed to a number of acquisitions Dobson had made since late last year, including properties in Alaska, its former American Cellular Corp. joint venture with AT&T Wireless Services Inc., properties in Michigan and the operations of NPI-Omnipoint Wireless L.L.C.
Roaming revenues increased slightly from $48.4 million last year to $50.6 million this year, with roaming yields per minute increasing 2 percent year-over-year to 14 cents per minute. AWS and Cingular Wireless L.L.C. remained Dobson’s largest roaming partners, accounting for 90 percent of the carrier’s incollect roaming revenues during the second quarter, while Dobson’s GSM network increased its share of roaming minutes from 10 percent in the first quarter to 23 percent in the second quarter.
Net income applicable to shareholders plunged from $224.4 million during the second quarter of 2003, or $2.42 per share, to a loss of $15.9 million this year, or a loss of 12 cents per share. Dobson noted that last year’s net income included a $194.7 million gain on redemption and repurchase of preferred stock, a $27.5 million gain on the sale of discontinued operations and $5.6 million in income from discontinued operations.
Further impacting Dobson’s revenues was a decline in average revenue per user from $41.99 during the second quarter of 2003 to $40.03 this year, and as previously reported, a drop in net customer additions from 19,900 last year to 7,200 subscribers this year. Dobson also previously reported that postpaid customer churn increased from 1.6 percent last year to 1.7 percent this year.
For the rest of the year, Dobson’s management revised its guidance from 455,000 gross customer additions it had forecast earlier this year to 386,500 gross customer additions, and downgraded its expectations for ARPU from around $42 to $40. In combination of a higher-than-expected rate of TDMA-to-GSM migrations, Dobson expects full-year earnings before interest, taxes, depreciation and amortization of between $335 million and $345 million compared with its previous guidance of between $390 million and $425 million.
Leap Wireless International Inc., which expects to emerge from Chapter 11 bankruptcy protection in the next several weeks, reported $205.7 million in revenues during the second quarter, compared with $185.6 million in revenues in the second quarter of 2003. For the first half of the year, revenues rose from $369.5 million in ’03 to $412.5 million.
Net losses also improved from a loss of $243.5 million during the second quarter of 2003, a loss of $4.16 per share, to a loss of $18.3 million this year, a loss of 31 cents per share. Second-quarter 2003 losses included a $181 million impairment charge relating to Leap’s wireless licenses and network assets.
Net customer additions increased from a loss of 53,770 subscribers during the second quarter of 2003 to a gain of 9,133 customers this year, which pushed Leap’s total customer base to 1.547 million subscribers. Reinforcing Leap’s strong turnaround in customer growth was a 17.8-percent increase in gross subscriber additions and a significant drop in customer churn from 4.6 percent last year to 3.7 percent.
ARPU improved from $36.48 during the second quarter of 2003 to $37.28 this year, while cost per gross addition dropped from $194 last year to $141 this year and the cash cost per user decreased from $23.55 to $18.47.
MetroPCS
Meanwhile, No. 13 MetroPCS Inc. said it under-reported $845,000 in service revenues and $503,000 in net income during the first quarter of this year, and it expects to restate its financials once an internal investigation by its audit committee is completed. MetroPCS originally reported $132.9 million in service revenues and $10.8 million in net income during the first quarter of this year.
MetroPCS reported late last month that it had begun a financial review of certain accounting issues relating to its previously disclosed financial statements. The review forced the carrier to postpone its planned initial public offering, which was expected to take place during the third quarter. The carrier also reported that the investigation would delay a filing of its second-quarter results as well as its second-quarter 10-Q filing.
Rural Cellular
Rural Cellular Corp., the nation’s 16th largest carrier, reported 8,144 net subscriber additions in the second quarter compared with 10,309 new customers last year. Postpaid churn increased year over year from 1.6 percent during the second quarter of 2003 to 1.8 percent this year.
ARPU increased from $44 during the second quarter of 2003 to $47 this year, while the acquisition cost per customer jumped from $426 last year to $454 this year.
Total revenues dropped slightly from $127.1 million last year to $126.6 million this year due to a drop in roaming revenues from $31.8 million during the second quarter of 2003 to $26.3 million this year. Rural Cellular noted the drop in roaming revenues reflected the first quarter transfer of its Oregon-4 RSA to AT&T Wireless Services Inc. and a decrease in outcollect yield from 21 cents per minute during the second quarter of 2003 to 16 cents per minute this year.
Net income applicable to shareholders increased from $382,000 last year, or 3 cents per share, to $3.4 million this year, or 27 cents per share.
AirGate
Sprint PCS affiliate AirGate PCS Inc. reported a 3.4-percent increase in revenues for its third fiscal quarter ended June 30, from $83.2 million in 2003 to $86 million this year. The increase was spread across the carrier’s service, roaming and equipment revenues, which all posted small year-over-year growth despite a nearly 30-percent drop in the carrier’s inbound roaming rate from Sprint PCS to 4.1 cents per minute.
Net income rose from a loss of $8.2 million last year, a loss of $1.59 per share, to a return of $2.2 million this year, or 18 cents per share.
Net subscriber additions increased nearly 33 percent from 5,593 customers during the third quarter of 2003 to 7,434 subscriber additions this year, bolstered by a drop in customer churn from 2.9 percent to 2.55 percent, which offset a slight drop in gross subscriber additions. AirGate’s management attributed the drop in churn to initiatives the carrier implemented during the quarter that it said addressed voluntary churn and improved prime customer retention.
ARPU decreased more than 2 percent from $59.90 during the third quarter of 2003 to $58.35 this year, while the CPGA dropped more than 13 percent from $381 to $330.
