Verizon Wireless is expected to continue leading the wireless pack in fourth-quarter subscriber adds, as analysts fine-tune their predictions and carriers get set to release financial results for the final period of 2005 in the next few weeks.
Various analysts anticipated that the fourth quarter will show marked effects of the high cellular penetration rate, from an elevated mix of prepaid additions to a relatively mild bump in sales due to the holiday season.
“With the U.S. wireless market approaching 70-percent penetration, the seasonal impacts of the fourth quarter are becoming increasingly muted,” said telecom analyst David Janazzo of Merrill Lynch.
Verizon Wireless is expected to continue its streak of industry-leading net customer additions, driven by retail postpaid subscribers. Merrill Lynch said that store checks showed Verizon Wireless seems to be luring customers away from its national competitors in smaller markets, and that Verizon Wireless’ family-plan-driven gains could slice into its annual revenue per user this quarter. SG Cowen & Co. anticipated that the carrier would continue to have a strong showing but that the results wouldn’t be quite up to its third-quarter figures because the carrier is moving its wares out of RadioShack Corp. stores across the country.
The crystal ball was also set for Sprint Nextel Corp. SG Cowen & Co. projected Sprint Nextel to post the largest gain in customer growth between the third quarter and fourth quarter of last year, while Merrill Lynch, which recently downgraded its investment opinion on Sprint Nextel from “buy” to “neutral,” took the perspective that Sprint Nextel had not gained significant momentum since the third quarter. Analysts from Bear Sterns expected to see Sprint Nextel meet its projections for 1.4 million net customer additions in the fourth quarter, with a significant shift toward prepaid.
“We expect this move toward prepaid to be a trend for the wireless industry in 4Q and beyond, as postpaid growth gets tougher to come by,” Bear Sterns analyst Phil Cusick said in a recent evaluation of Sprint Nextel.
RadioShack recently reported that its service sales were up 30 percent, driven mostly by higher sales of prepaid wireless airtime. The company’s total sales were up 5 percent during the fourth quarter, but that growth was driven largely by non-cellular consumer electronics sales, company officials said. While the chain’s wireless sales were up 6 percent, company officials said that strong kiosk sales had offset substantially weaker in-store sales.
David Edmondson, president and chief executive officer of Radioshack, said that “wireless was negatively impacted in our core stores due to our carrier transition from Verizon Wireless.”
Cingular Wireless L.L.C., which began moving into RadioShack stores this month, didn’t have a Motorola Inc. Razr-like product to spur fourth-quarter sales this year, and analyst expect to see only modest growth-in spite of Cingular’s addition of a T-Mobile USA Inc.-esque 1,500 minute promotional plan in the fourth quarter. Cingular’s churn was projected to be between 2.3 and 2.4 percent, down from 2.6 percent in the same quarter last year.
Merrill Lynch projected that T-Mobile USA would see steady growth. The carrier recently increased the minutes on its basic $40 plan from 1,000 to 1,500. T-Mobile USA is expected to add around 921,000 net subscribers and land a churn rate of 3.0 percent. RCR
