The nation’s big five operators are not about to slow down. Following a record-setting year in which the wireless industry added more than 22 million customers and surpassed 60-percent penetration, analysts expect the industry’s largest operators to post more than 4.5 million net subscriber additions for the first quarter. That is well ahead of the 4 million posted during the first three months of last year.
Cingular Wireless L.L.C. and Verizon Wireless are expected to duke it out for the top spot again. Analysts predict each carrier to post more than 1 million net customer additions for the quarter, further padding their industry-leading subscriber base positions. Cingular surprised many when it edged out Verizon Wireless in customer additions during the fourth quarter of last year, ending Verizon Wireless’ six straight quarters of industry-leading growth.
Merrill Lynch recently raised its estimates for Cingular from 900,000 net additions to 1.2 million, citing lower-than-expected churn and material contributions from prepaid services and resellers. The firm noted that it had “overstated the pace at which Cingular would execute the AT&T Wireless integration process,” and as a result, subscriber growth and customer churn results have been better than expected.
Merrill Lynch also raised its full-year customer growth estimates for Cingular from 3 million subscribers to 3.8 million after lowering its full-year churn estimates from 2.7 percent to 2.4 percent.
Cingular could see some moderation of its average revenue per user results as analysts noted the carrier firmed up some of its pricing plans earlier this year in an attempt to steer customers to higher-priced offerings. Cingular also raised the price of its entry-level family plans from $60 to $70, which could help alleviate an admitted ARPU drain during the fourth quarter of last year. RBC Capital Markets telecommunications industry analyst Jonathan Atkin-who has forecast Cingular to add more than 1.4 million net subscribers during the first quarter-noted that the $70 plan was one of Cingular’s more popular plans during the quarter.
After losing its title as the nation’s largest wireless operator to Cingular in 2004, Verizon Wireless is expected to regain its claim as the fastest-growing operator; analysts predict the carrier will post between 1.4 million and 1.5 million net additions. Boosting Verizon Wireless’ continued strong growth is its segment-leading customer churn, which is forecast to be 1.5 percent in the quarter, below the 1.7 percent posted in first-quarter 2004 and a slight increase from the company-record 1.4 percent reported in fourth-quarter ’04.
RBC’s Atkin noted that Verizon Wireless could see some pressure on its ARPU as the carrier recently made changes to its rate plans, which reduced the cost of adding a line to its family plan offerings, eliminated roaming charges on its wildly popular America’s Choice plans and provided more peak minutes on its North America’s Choice plans.
T-Mobile USA Inc. is expected to lead the three remaining nationwide operators with estimates of between 750,000 and 800,000 net customer additions during the first quarter. Those forecasts are about 30 percent below the nearly 1.2 million subscribers T-Mobile USA added in first-quarter 2004 and highlight the increasing competition the carrier is facing from its larger and rapidly growing rivals.
Analysts also noted that T-Mobile USA could post an increasing percentage of prepaid customer additions during the first quarter, which is traditionally the strongest quarter for prepaid activations. The carrier reported earlier this year that its prepaid customer base jumped from 10.8 percent during the third quarter of 2004 to 11.4 percent during the final three months of last year.
Sprint Corp. and Nextel Communications Inc., which are in the midst of a merger that is scheduled to close later this year, are expected to combine for around 900,000 net customer additions in the quarter, with Nextel adding approximately 500,000 direct customers and Sprint signing up 400,000 direct subscribers. Both results would be in line with first-quarter 2004 numbers.
Nextel’s growth is expected to continue to be bolstered by its strong business- and government-centric core customer base that has helped the carrier post mid-1-percent customer churn results for several years. Sprint, on the other hand, is reportedly seeing strong acceptance of its overage-protecting Fair & Flexible rate plan offerings that analysts note have become the standard offer sold by many of the carrier’s retail outlets.
The wild card for both operators continues to be their indirect customer additions, which include Nextel’s Boost Mobile L.L.C. prepaid service offering and Sprint’s numerous mobile virtual network operators and affiliates.
Analysts expect Boost to post around 250,000 customer additions during the quarter, which would push the Nextel wholly owned subsidiary’s total customer base to nearly 1.5 million subscribers. Sprint’s network partners could prove even more lucrative as the carrier’s indirect channels pumped in more than 900,000 net customer additions during the fourth quarter of last year and are becoming an increasingly important segment for Sprint.
Despite the fast start to 2005, Merrill Lynch said it expects full-year customer growth of around 20 million subscribers, which would be more than 2 million subscribers short of last year’s results though still an impressive 11-percent year-over-year industry increase.
