Wireless drove revenue growth at Alltel Corp. and aided Qwest Communications International Inc. with success in bundling services in the first quarter of 2006, but regional wireless operator SunCom Wireless Holdings Inc. had a rough quarter and was roundly punished for it by Wall Street.
Alltel posted mixed first quarter results, with strong wireless growth and healthy customer numbers but lower net income due to merger-related expenses from the acquisition of Western Wireless Corp. and the upcoming spin-off of the company’s wireline operations.
Alltel’s total revenues were up almost 20 percent to $2.5 billion, in line with analysts’ expectations. But Alltel’s net income was about $300 million, which was 5-percent lower than the same period last year.
On the wireless side, Alltel beat analysts’ expectations on customer figures, adding 165,000 new customers. The carrier reduced its churn rate to 2 percent, a drop of 0.2 percent from the fourth quarter of 2005. The carrier also continued to buck the industry trend of falling average revenues per user-instead, it increased ARPU by about 4 percent compared to 2005’s first quarter, to $50.90. Of that, more than 5 percent-or $2.86-came from data services, a 59-percent increase over the first quarter of 2005.
“We are very pleased with the performance of the wireless business, and are encouraged by the opportunities we see going forward,” said Scott Ford, Alltel’s president and chief executive officer. The company said it is on track to complete the spin-off of its wireline business and the merger of that business with Valor Corp. by mid-year. Alltel ended the quarter with 10.8 million customers. The company’s stock traded down slightly after its earnings release.
Meanwhile, SunCom’s stock plunged as much as 20 percent at one point last week as investors reacted to the company’s widening financial losses during the first quarter.
SunCom’s revenues dropped about 1 percent compared with the first quarter of 2005, to $201.8 million; roaming revenues were down about $2.4 million from the year-ago quarter. The operator’s loss from operations expanded from about $32.3 million to nearly $110 million. While SunCom’s adjusted earnings before interest, taxes, depreciation and amortization fell from $31 million in the first quarter of 2005 to $7 million this year, adjusted EBITDA was up sequentially from a loss of about $13.5 million in the fourth quarter of 2005.
SunCom’s average revenue per user was down about 7.7 percent from the first quarter of 2005 to $51.55. The regional carrier did manage to cut its churn rate from 2.9 percent a year ago to 2.5 percent in the first quarter, which the company said reflected a stabilization of its customer base. Its gross customer additions were up from about 92,000 in the first quarter of 2005 to about 116,000 last quarter, which along with its reduced churn pushed SunCom’s net customer additions to 41,000 subscribers during the first three months of this year.
SunCom, which offers service in the Southeastern U.S., Puerto Rico and the U.S. Virgin Islands, ended the quarter with just over 1 million subscribers.
SunCom also reported that its subsidiary SunCom Wireless Investments Co. L.L.C. contributed $194.4 million to SunCom Wireless Holdings due to a dividend that was improperly paid to the investment company in November 2004.
As for Qwest, the carrier said its focus on service bundles paid off during the first quarter, with the plans helping to raise the company’s average revenue per user and driving growth in the telecom company’s wireless segment. Qwest’s overall operating revenue was essentially flat at $3.47 million-but the company managed to cut costs in order to raise its net income by more than 54 percent.
Qwest, which offers wireless service using a mobile virtual network operator model on Sprint Nextel Corp.’s CDMA network, reported 10-percent growth in its wireless revenue compared with the first quarter of 2005. The carrier increased its customer base by 14,000 subscribers, and ended the quarter with 784,000 wireless subscribers.
The company said about 75 percent of its wireless customers receive an integrated bill with at least one other service. Overall, Qwest said that its bundles of voice packages plus three products are up more than 100 percent compared with the year-ago quarter, and that value-added services have driven up the company’s wireline ARPU to $49 from $46 in the same period of last year.
Wireless data features helped raised Qwest’s wireless ARPU 9 percent, from $46 in 2005’s first quarter to $50 in the first quarter of 2006.
“The company continues to focus on adding wireless data subscribers, and approximately 50 percent of new customers sign up for a data service,” Qwest noted.
