ALEXANDRIA, Minn.-Rural Cellular Corp. reported mixed first-quarter results showing a modest increase in revenues offset by increased net losses and continued net customer losses, which the carrier attributed to network issues associated with technology migration plans.
Total revenues for the first quarter increased slightly from $119.8 million in 2004 to $123.4 million this year. The 3-percent increase was led by gains in service and equipment revenues that offset a decline in roaming revenues from $25.7 million in 2004 to $19.6 million this year. The carrier’s roaming revenues decreased from 21.5 percent of total revenues during the first quarter of 2004 to 15.9 percent this year.
Rural Cellular’s management noted roaming revenues were hurt by the accelerated transition of its national roaming partners to next-generation technology handsets, which impacted total roaming minutes, and the transfer of one of its service areas to AT&T Wireless Services Inc. in early 2004. Rural Cellular also noted that roaming yield per minute dropped from 18 cents per minute last year to 14 cents per minute this year.
Net losses grew from $18.5 million during the first quarter of 2004, a loss of $1.51 per share, to $21.8 million this year, a loss of $1.77 per share. The carrier attributed the slide to a 13.7-percent increase in network costs reflecting additional costs of operating multiple networks, increased incollect expense and new cell site activations during the quarter.
Also impacting Rural Cellular’s bottom line was the loss of 3,064 subscribers during the quarter, which left the carrier with 726,747 total customers at the end of the first quarter. The carrier attributed the customer losses to an increase in customer churn from 2 percent during the first quarter of 2004 to 2.4 percent this year.
Rural Cellular noted TDMA customer service issues in its Northeast and Northwest regions drove the increased customer defections during the quarter. Rural Cellular explained that it experienced technical issues on its legacy TDMA network in those regions, as well as saturation of its call centers resulting from activations and migrations, and other calls dealing with billing and technical questions.
Rural Cellular did report that average revenue per user increased from $43 during the first quarter of 2004 to $47 this year, though the growth was offset by booming customer acquisition costs that jumped from $393 last year to $461 this year.
Rural Cellular’s stock price was trading down more than 5 percent early Tuesday at $4.85 per share.
