Alltel Corp. officials emphasized plans to continue their conservative path during a company analyst day in New York last week, even though they said they remain optimistic going forward.
“We’ve never been `let’s swing for the fences’ and bet everything on a roll of the dice that we don’t feel like we can reasonably predict and control,” said Scott Ford, the company’s chief executive officer, when analysts prodded him to prioritize options such as purchasing rural carriers, acquiring spectrum or generally taking new risks as a wireless-only business once Alltel’s wireline operations are spun off later this year.
However, Ford added, being purely wireless allows Alltel to put more effort into thinking about prospects such as replacing historically wired services with wireless.
“I think we’ve taken advantage of every opportunity we’ve reasonably had, but we haven’t been leaning into it. We just tried to keep pace,” Ford said. “I think you’ll see the wireless business lean into that a little bit more than we have in the past.”
Alltel expects to earn between $6.95 billion and $7.1 billion in service revenue as a wireless-only business, up 8 to 10 percent from last year. Its wireline business, which is being spun off and merged with Valor Corp., is expected to earn between $1.16 billion and $1.18 billion. For 2005, Alltel’s wireless business accounted for 65 percent of its $9.5 billion in revenue.
The nation’s fifth-largest wireless carrier did not offer any guidance on net customer additions, except that it expects 2006 adds to be greater than the pro forma 425,000 customer additions for 2005.
Alltel was busy last year as it expanded its footprint through purchases of Western Wireless Corp. and Public Service Cellular Wireless, and exchanged properties with Cingular Wireless L.L.C. and U.S. Cellular Corp. Alltel said it expects to complete its international divestitures-to the tune of $1.7 billion-in the first quarter, and close on its acquisition of Midwest Wireless during the second quarter.
“We believe that much of 2006 will be dedicated to getting the bulk of WWCA integration completed and establishing the Alltel brand in the Midwest Wireless markets,” said analyst Colette Fleming of UBS Investment Research in a report following Alltel’s presentations.
Alltel also intends to:
- Expand its CDMA2000 1x EV-DO offerings beyond the dozen markets where the service is already available to cover about 60 percent of its potential customers.
- Increase the number of EV-DO-capable handsets it offers, which is limited to a pair today-including the Motorola Inc. Razr. Kevin Beebe, group president of operations, said that 50 to 60 percent of the handsets Alltel adds this year would be EV-DO ready, and that 15 to 20 percent of customers likely would have them by the end of the year.
- Drive more sales through alternative channels such as its Web site and call centers to lower customer acquisition costs.
- Expand its CDMA roaming agreements with Verizon Wireless and Sprint Nextel Corp. to include EV-DO roaming, and enhance GSM roaming with Cingular and T-Mobile USA Inc. Beebe said Alltel has commitments to build out some ex-Western Wireless markets with GSM, and is talking with the two major GSM carriers about expanding GSM roaming in rural Alltel heritage markets.
- Launch new products such as an EV-DO-enabled Research In Motion Ltd. Blackberry device, MP3-capable phones and new content to drive data average revenue per user.
“I believe that most of our revenue and ARPU growth in ’06 will come from data,” said Beebe, who added that as Alltel competes with the four larger carriers on price, he did not expect to see much increase in retail ARPU. Beebe also emphasized that despite a large number of prepaid customers added in the fourth quarter of 2005, Alltel had added far more postpaid customers than most analysts expected. “We’re not giving up on postpaid.”
As far as spectrum purchases and possible buildouts in markets such as New York, Los Angeles and Miami, Ford would only say that a list of things such as partners, limited risk and company balance sheets would have to be in order for Alltel to be a significant player.
“A lot of those things would have to fall into place that I would guess probably won’t, but may,” Ford said.
Interestingly, Alltel’s wireline spinoff could launch a mobile virtual network operator service in its future, according to Jeff Gardner, who is currently executive vice president and chief financial officer of Alltel and will be president and CEO of the new wireline operations.
“I know some people in that business,” he joked with analysts, adding that an MVNO would provide additional revenue and allow the company to keep up with other telecommunications companies who are looking to add wireless services to their repertoire. “That will definitely be on our agenda in 2006,” Gardner said of an MVNO.
