The second-quarter earnings race got off to a relatively solid start as Cingular Wireless L.L.C. and Nextel Communications Inc. posted financials largely in line with Wall Street expectations. The results-coupled with those from the handset and infrastructure markets-served to underpin predictions of continued growth within the wireless sector.
Market-leader Cingular popped with 1.1 million in net additions-surpassing most expectations-and improved on its customer and financial metrics. Nextel too surpassed forecasts with 763,000 new subscribers-550,000 to Nextel and 213,000 to its Boost Mobile offering. The carrier ended the quarter with 17.8 million subscribers, a number that includes 1.7 million Boost Mobile users.
“Cingular continues to make good progress on a variety of fronts,” said Stan Sigman, the carrier’s president and chief executive officer. “We are pleased with our performance in margins, postpaid subscriber net additions and revenue.”
Cingular said nearly all of its net additions were postpaid subscribers. The numbers bring the carrier’s total subscriber base to 51.6 million-way ahead of Verizon Wireless’ 45.5 million. However, some analysts expect Verizon Wireless to beat Cingular in the second quarter with 1.4 million additions.
Verizon Wireless and Sprint Corp. plan to post their second-quarter earnings this week.
Cingular’s average revenue per user clocked in at $50.43, up 1.7 percent from $49.59 in the first quarter of this year, but down from the same quarter a year ago. The carrier said the decline from a year ago was due to the popularity of its family plans and its Rollover program.
However, Cingular said its ARPU increase from the first quarter was largely due to a jump in its data sales. Cingular’s data ARPU climbed more than 12 percent to $4.16, compared with $3.70 in the first quarter. The carrier said its text messaging, mobile instant messaging, mobile e-mail, downloadable ringtones, games, photo messaging and media bundles contributed to the spike.
Cingular’s churn rate held steady at 2.2 percent, the same as in the first quarter. Cingular said the number primarily reflects the transition of former AT&T Wireless Services Inc. prepaid customers.
As for the carrier’s finances, Cingular recorded revenues of $8.6 billion, up 5.4 percent from the same quarter last year. The numbers combine Cingular’s and AT&T Wireless’ operations. The carrier reversed its $152 million loss from the first quarter to a net income of $317 million in the second quarter.
The earnings announcement also gave Cingular a chance to update the Street on its network operations.
The carrier said 4 million former AT&T Wireless customers have moved over to Cingular’s systems since the carrier finished its acquisition last year. Now, 70 percent of Cingular’s total subscriber base connect to its own billing servers and systems.
As part of Cingular’s integration process, it has closed 340 stores and kiosks and has plans to close an additional 160 this year. At the same time, the carrier expects to build up to 175 new locations to flesh out its retail coverage, bringing its total number of outlets to around 2,280. The moves coincide with more than 11,000 job cuts that were previously announced as part of the acquisition process.
Cingular also is working to digest AT&T Wireless’ network. The carrier said it will finish work on its combined TDMA network this year, turning off 10,000 cell sites across 47 markets. Cingular said the decommissioning would cut out spare capacity on its network, thereby lowering network maintenance costs.
The TDMA tear down coincides with an increase in the use of the carrier’s GSM network; almost 80 percent of Cingular’s minutes travel over its GSM network.
As for Cingular’s W-CDMA/HSDPA plans, the carrier reiterated its promise to launch 15-20 markets by the end of this year. The carrier said it has 11 devices and 3 PC cards in the pipeline for the new network.
“We’re not only integrating networks, we’re modernizing them,” said Ralph de la Vega, Cingular’s chief operating officer.
In other Cingular news, the carrier said it plans to spend $59 million in Oklahoma and $71 million in Arkansas this year improving its coverage.
The carrier said it will install 99 new cell sites and improve its capacity in Arkansas, and it will install 43 new cell sites in Oklahoma.
As Cingular works to absorb AT&T Wireless’ operations, Nextel said it is ready to get under way with its own alliance with Sprint Corp. Nextel’s chief executive Tim Donahue said he expects Sprint’s acquisition to close “in the next couple of weeks,” and that a combined Sprint Nextel would present itself to customers 30 days after that date. Donahue predicts the combined carrier will emerge well ahead of the fourth quarter.
Merger plans
However, Sprint and Nextel face several serious issues related to their merger, chiefly among them how the carriers’ affiliates will play into the picture. Nextel Partners Inc. as well as several Sprint affiliates have taken their grievances over the acquisition to court, apparently in an effort to prompt an acquisition by the combined Sprint Nextel. During a conference call with investors, Nextel’s executives offered little information on how the combined company would deal with its affiliate issues.
Aside from the acquisition, Nextel posted results ahead of most expectations. The carrier witnessed a 16-percent jump in revenues compared with the second quarter of last year to $3.8 billion. Analysts polled by Thomson First Call had expected $3.76 billion in revenues. Nextel reported earnings per share in the quarter of 46 cents, up from expectations of 44 cents. However, Nextel’s earnings were nowhere near its results from last year-partially due to a tax benefit last year as well as the carrier’s $35 million in costs related to the upcoming Sprint acquisition.
The carrier’s average churn clocked in at 1.4 percent, and its average revenue per user was $68.
In other carrier news, Sprint PCS affiliate iPCS Inc. added nearly 12,000 net subscribers during its third fiscal quarter, bumping its total number of customers to 271,000 for the period ending June 30.
iPCS said it had gross additions of 32,300 users during the period and had a monthly churn rate of 2.2 percent.
Horizon PCS, which merged with iPCS effective July 1, claimed 4,200 net additions during the quarter and a monthly churn of 2.6 percent.
iPCS is suing Sprint over its merger with Nextel.
