UbiquiTel Inc. touted its solid fourth-quarter results last week and company officials spoke of future plans for a prepaid product and possible benefits from Sprint Nextel Corp.’s joint venture with several cable companies-even though analysts expect that the Sprint Nextel CDMA affiliate will be acquired within the next few months.
In an analyst conference call, UbiquiTel officials declined to make any comments about possible discussions with Sprint Nextel related to a takeover. The operator expects that final arguments in its court case against Sprint Nextel for violations of exclusivity agreements will take place in April, with a decision sometime after that.
Sprint Nextel has steadily tucked away a string of affiliates since Sprint Corp. completed its acquisition of Nextel Communications Inc. last August, with UbiquiTel, Shenandoah Telecommunications Co. and iPCS Inc. among those affiliates still independent.
UbiquiTel officials said that customer “confusion, indecision and apprehension” related to the Sprint Nextel deal slowed its momentum in the fourth quarter of last year, contributing to the company’s reported net adds of only 53,000 subscribers for the full year-way down from the 70,800 customers UbiquiTel added in 2004 and less than analysts had expected. The company added 13,600 net retail customers in the fourth quarter and 17,900 reseller customers to end the year with a total of 447,900 retail customers and 145,000 wholesale and reseller customers. The operator did manage to cut its customer churn from 2.9 percent in 2004 to 2.5 percent for 2005.
Donald Harris, UbiquiTel’s chairman and chief executive officer, said that a resolution of the exclusivity lawsuit in UbiquiTel’s favor would “help us minimize the brand confusion.”
In addition, the carrier faced stiff competition in California’s Central Valley from prepaid offerings by MetroPCS Inc. and Leap Wireless International Inc.’s Cricket and recently launched Jump service; UbiquiTel is discussing a prepaid product with Sprint Nextel. Sprint Nextel currently offer prepaid services through its Boost Mobile L.L.C. subsidiary and have a financial interest in prepaid mobile virtual network operator Virgin Mobile USA L.L.C.
Although UbiquiTel officials did not offer any details, they also indicated that Sprint Nextel was examining the possibilities of CDMA/iDEN add-a-phone plans.
UbiquiTel turned out positive numbers for 2005, including increased income and reduced churn, but its average revenue per user slipped and the company added 25-percent fewer customers than it did in 2004. The operator earned $47.4 million in net income for 2005, way up from the loss of $15.3 million it recorded in 2004. UbiquiTel got a boost from a $32.1 million income tax benefit, while its litigation expenses related to Sprint’s acquisition of Nextel were $4.3 million. Without the tax benefit or the litigation, UbiquiTel’s net income was $19.9 million for 2005, still a substantial improvement from the prior year. Revenue totaled $107.8 million for the fourth quarter and $422.7 million for the year.
UbiquiTel’s average revenue per user slid in both quarterly and yearly comparisons, losing $2 from the fourth quarter of 2004 to land at $55 for the final quarter of 2005. In a year-over-year comparison the drop wasn’t as steep: ARPU of $56 for 2005 vs. $57 for the full year of 2004.
The Sprint Nextel affiliate recorded adjusted earnings before interest, taxes, depreciation and amortization of $26.8 million in the fourth quarter, up 30 percent from the same time in 2004. For the year, adjusted EBITDA was $110.5 million, having grown more than 50 percent in a year-over-year comparison.
