Cingular Wireless L.L.C. kicked off 2006 with a strong first quarter that exceeded analysts’ expectations, including driving its churn rate down to a company-record low of 1.9 percent overall, with 1.6 percent postpaid churn. But while Cingular’s postpaid average revenue per user showed growth, the carrier’s total ARPU continued to slide.
Gross customer additions were flat at 4.7 million subscribers during the quarter, but the lower churn rate pushed Cingular’s net customer additions up to 1.7 million subscribers for the quarter-a boost of more than 20 percent from the 1.4 million that it added in the first quarter of 2005. Cingular said it added 900,000 retail postpaid subscribers, 147,000 prepaid customers and 632,000 subscribers through resellers, which Bear Stearns analyst Philip Cusick noted was an improved mix from last quarter.
“Cingular got out of the gate fast in the first quarter of 2006,” said Stan Sigman, Cingular’s president and chief executive officer. “We continue to move in the right direction on our major metrics-churn, customer additions, margins, revenue growth and more.”
Cingular’s revenue for the quarter hit $9 billion, an increase of 9 percent from first-quarter ’05. Equipment revenues in particular were healthy, jumping more than 20 percent from the $810 million generated in the first quarter of last year. Capital expenditures climbed nearly 50 percent to $1.4 billion-which Sigman credited for helping improve Cingular’s churn rate.
“Our continuing improvement in churn is directly related to the investments and enhancements we are making in our network, day in and day out, in cities and towns all around the country,” Sigman said. “Customers experience these improvements for themselves, and as a result, not only buy from Cingular but stay with Cingular.”
However, the carrier’s overall ARPU skidded 2.3 percent to $48.48 compared to the first quarter of 2005-when ARPU already was down 3.3 percent from 2004’s first quarter. Cingular blamed the ARPU dip on the number of wholesale customers in the carrier’s customer base, and added that the impacts “were largely offset by a continued increase in data ARPU.”
“Although reported all-in ARPU continues to look worse due to prepaid and wholesale dilution for most of the Big Four carriers, actual postpaid ARPU is improving because of data strength and as the speed of family-plan migration slows,” noted Cusick.
The carrier’s data ARPU clocked in at $5.22, reflecting growth of more than 40 percent from last year’s first quarter and almost 11-percent sequential growth. However, company officials noted that the data ARPU figure was not yet significantly impacted by the rollout of the carrier’s UMTS/HSDPA high-speed mobile network. Cingular’s HSDPA network is available in 16 markets, and the carrier plans to have it available in all of the top 100 U.S. markets by the end of this year.
The largest U.S. carrier said that as of the first quarter, it counted more than 25 million active data customers and delivered 91 million multimedia messages as well as 6.8 billion text messages. Cingular ended the first quarter with 55.8 million total customers on its network.
During a conference call with analysts, company officials said that integration plans related to the AT&T Wireless Services Inc. merger were progressing on track. About 89 percent of its subscriber base is GSM-equipped, and about 97 percent of minutes used go over Cingular’s GSM network. Cingular has completed its TDMA network integration and is working on GSM integration. On the retail front, the carrier closed 620 poorly performing or overlapping stores last year and built another 130 new stores, as well as starting to offer Cingular products in Radioshack stores as of Jan. 1.
Company officials did not give specific numbers of customer additions that came through Radioshack, but said that they were pleased with the number and quality of the customers. Cingular subsidized a significant number of handsets last quarter, especially the various color versions of Motorola Inc.’s Razr, and that drove some of the operator’s postpaid business. But the carrier is likely to do less subsidizing in the coming months, unless the market dictates otherwise, said Chief Operating Officer Ralph de la Vega.
Cingular also plans to expand its selection of push-to-talk enabled handsets, de la Vega added.
“You’re going to see a much more robust portfolio of handsets and PDAs that have push-to-talk, that will significantly extend the reach of our push-to-talk products in the coming quarters,” said de la Vega. He went on to add that Cingular would be offering handsets that integrate both Wi-Fi and GSM capabilities “in the next quarter or so.”
