Verizon Wireless is on track to post another record quarter of net additions driven by back-to-school and family-plan additions, according to a report from Merrill Lynch. Based on more than 80 store visits in five markets, the firm said it raised its third-quarter net customer addition guidance for Verizon Wireless from 1.8 million subscribers to 1.95 million subscribers, and at the same time, lowered its churn estimates from 1.3 percent to1.2 percent.
“Verizon Wireless continues to deliver a strong and consistent quality message,” noted Merrill Lynch telecommunications analyst David Janazzo. “Verizon Wireless stores stress that the carrier invests more in its network than any of its competitors.”
Verizon Wireless posted an industry-record 1.921 million net customer additions and industry-leading customer churn of 1.2 percent in the second quarter.
Verizon Wireless’ stronger-than-expected growth during the third quarter appears to be coming at the expense of Sprint Nextel Corp., which had its quarterly direct net customer addition estimates cut from 900,000 subscribers to 800,000 subscribers by Merrill Lynch. The investment banking firm noted that while Sprint Nextel kicked off its rebranding efforts in early September, store personnel “seemed somewhat confused on the new combined offer, although the situation improved throughout September.”
That confusion is expected to bump up Sprint Nextel’s customer churn from a pro forma 1.8 percent during the second quarter to 2 percent during the third quarter.
Sprint Nextel’s wholesale and reseller partnerships, including Virgin Mobile USA L.L.C. and Boost Mobile L.L.C., are expected to add another 500,000 customers during the third quarter, bringing Sprint Nextel’s total customer additions to around 1.3 million subscribers.
Merrill Lynch maintained its previous third-quarter customer growth estimates of 900,000 net customer additions for Cingular Wireless L.L.C., but noted that growth was leveling off following the carrier’s post-merger influx, and prepaid services were more of a focus during the third quarter. Cingular recently relaunched its GoPhone prepaid offering, which it inherited when it acquired AT&T Wireless Services Inc. last fall.
Merrill Lynch also maintained its previous estimate of 800,000 net customer additions for T-Mobile USA Inc., which was touted as being the most effective carrier at aligning customer expectations and its service delivery proposition. T-Mobile USA store personnel noted that sales remain steady for the carrier with emphasis on its $46 per month for 1,000 anytime calling minutes and unlimited night and weekend calling promotion.
Regional CDMA-based operators also were singled out as outperforming their GSM-based rivals, which Merrill Lynch attributed to a possible Verizon Wireless “halo effect” on CDMA network quality, as well as continued issues of TDMA to GSM migration.
CDMA operator Alltel Corp., which completed its acquisition of Western Wireless Corp. during the quarter, is expected to add 117,000 subscribers during the third quarter, while fellow CDMA carrier U.S. Cellular Corp. is forecast to add 110,000 subscribers.
Smaller regional GSM players SunCom Wireless Holdings Inc. and Cincinnati Bell Inc. both are expected to post net customer losses during the quarter of 5,000 subscribers and 3,000 subscribers respectively. Merrill Lynch noted that national carriers were reporting that half of their incoming customer ports in SunCom’s markets were coming from SunCom, while Cincinnati Bell was seeing increased competition in its markets from Verizon Wireless.
