Verizon Wireless continued to dominate its competitors during the third quarter by adding more than 1.9 million net customers. The strong growth was a 15-percent improvement on the 1.7 million the carrier added last year and handily trumped the 969,000 direct customers added by Sprint Nextel Corp. and the 867,000 customers added by larger rival Cingular Wireless L.L.C.
With T-Mobile USA Inc. yet to report, the industry’s three largest operators are slightly ahead of the 3.656 million direct customer additions posted during the third quarter of 2004, and analysts expect T-Mobile USA to match the 901,000 customers it added last year.
Verizon Wireless noted that it has added more than 7 million customers through the first nine months of this year and that it ended the third quarter with 49.3 million total subscribers. Cingular ended the third quarter with 52.3 million total subscribers, while Sprint Nextel served 38 million direct and 45.6 million total customers at the end of the quarter.
Verizon Wireless also reported that more than 1.6 million customers owned CDMA2000 1x EV-DO capable devices at the end of the quarter. The number includes the carrier’s business-focused BroadbandAccess and consumer-oriented Vcast services.
Verizon Wireless’ industry-low churn tumbled from 1.5 percent during the third quarter of 2004 to 1.3 percent this year. Customer turnover increased sequentially from the 1.2 percent the carrier reported during the second quarter of this year.
While Verizon Wireless’ customer growth metrics remained robust, the carrier continued to struggle with customer revenues. The carrier’s ARPU dropped 2.8 percent year-over-year to $50.13 during the third quarter but increased 1.4 percent from the second quarter of this year. Analysts have cited the strong adoption of family plans as a reason for the ARPU decline but also for boosting Verizon Wireless’ customer growth.
Despite the drop in recurring revenues, Verizon Wireless’ total revenues surged more than 14 percent from $7.3 billion during the third quarter of 2004 to $8.4 billion this year. Operating margins dropped from 22.5 percent last year to 21.8 percent this year, while segment income jumped 20 percent from $478 million to $574 million.
Sprint Nextel said it added 1.272 million total customers to its network during the third quarter, which was in line with guidance it provided late last month but below the 1.697 million pro forma customers added by Sprint Corp. and Nextel Communications Inc. as separate companies during the third quarter of last year.
Sprint Nextel also reported that the channel mix was different than previous guidance as the carrier said it added 669,000 direct subscribers compared with its guidance of around 700,000 direct customer additions. Analysts noted the difference was made up by Sprint Nextel’s Boost Mobile L.L.C. prepaid subsidiary that added 300,000 customers during the third quarter compared with previous forecasts of 230,000 net subscriber additions and well above the 195,000 customers Boost added during the third quarter of last year.
Sprint Nextel’s wholesale operations, which is dominated by its Virgin Mobile USA L.L.C. mobile virtual network operator venture, contributed 213,000 customers during the third quarter compared with 422,000 customers last year. Sprint Nextel’s CDMA-based affiliates also fell short of last year’s results adding 90,000 customers during the third quarter of 2005 compared with 101,000 customers this year.
Postpaid customer churn improved slightly from a pro forma 2.2 percent during the third quarter of 2004 to 2.1 percent this year, but increased sequentially from 1.9 percent during the second quarter of this year. Postpaid average revenue per user dropped 3 percent from a pro forma $67 during the third quarter of last year to $65 this year. Sprint Nextel noted that hurricane-related customer credits dropped its postpaid ARPU by 34 cents during the third quarter.
Sprint Nextel also reported Boost’s prepaid results, which included 4.9 percent customer churn and $37 in ARPU during the third quarter.
Pro forma wireless revenues surged 12 percent from $7.2 billion during the third quarter of last year to nearly $8.1 billion this year. Wireless revenues accounted for 72 percent of Sprint Nextel’s pro forma $11.2 billion in total revenues during the third quarter of this year, up from the 69.5 percent of its pro forma $10.3 billion in revenues posted during the third quarter of last year.
Adjusted net income also increased 60 percent from $462 million during the third quarter of last year, a return of 16 cents per share, to $737 million this year, a return of 25 cents per share.
Sprint Nextel’s chief technology officer Barry West also said last week during a keynote presentation at Wireless Communications Association’s Carrier and Enterprise Leadership Briefing that the carrier was on track to deciding on a technology platform for its extensive 2.5 GHz spectrum holdings.The carrier would by the decision by the end of the first quarter. The carrier is in the process of trialing WiMAX platforms from Motorola Inc. and Samsung Telecommunications America L.L.P. as well as IP Wireless Inc.’s UTMS TD-CDMA solution, and it finished up a trial earlier this year using Flarion Technologies Inc.’s Flash OFDM technology.
Nextel Partners
Nextel Partners Inc. posted third-quarter results that included both strong financial and operational metrics.
The carrier reported $473.1 million in total revenues during the third quarter. The result was a 31.5-percent improvement compared with the $359.8 million in revenues the carrier posted for the third quarter of 2004. Nextel Partners is in the midst of a tug of war with its network partner over a fair price for Sprint Nextel to pay to acquire Nextel Partners.
The revenue growth was pittance compared with the more than 1,000-percent jump in the carrier’s net income from $34.4 million during the third quarter of 2004, a return of 12 cents, to $434.5 million this year, a return of $1.41 per share. A $378.5 million net tax benefit boosted the growth. The tax benefit was tied to a release of a portion of the company’s deferred tax valuation allowance offset by income tax expense related to the first two quarters of this year. Excluding the tax benefit, Nextel Partners posted a more modest return of 18 cents per share.
Nextel Partners previously reported a company-record 107,200 customers during the third quarter, which was well above analysts’ estimates and a 14.7-percent jump from the 93,500 customers the carrier added during the third quarter of last year. Nextel Partners ended the quarter with more than 1.9 million customers.
The carrier also previously reported that customer churn remained steady at 1.3 percent, which was in line with its second-quarter results and below the 1.4-percent churn the carrier reported last year. ARPU also improved sequentially from $68 during the second quarter to $69 during the third quarter, but was flat year-over-year.
UbiquiTel
Sprint Nextel wireless affiliate UbiquiTel Inc. posted a disappointing 10,700 net customer additions during the third quarter, which was well below the 17,500 subscribers the carrier added last year although in line with estimates. UbiquiTel ended the quarter with 434,300 direct subscribers and 127,100 wholesale customers on its network.
The carrier blamed its year-over-year drop in customer additions on a 12-percent decrease in gross customer additions that offset an improvement in customer churn from 2.9 percent last year to 2.6 percent this year. ARPU also dropped from $58 during the third quarter of last year to $56 this year.
UbiquiTel’s total revenues jumped more than 11 percent from $97.7 million during the third quarter of last year to $108.8 million this year. Net income improved from $1.5 million, a return of 2 cents per share, to $6.2 million, a return of 6 cents per share.
