Two years after Cingular Wireless L.L.C. acquired AT&T Wireless Services Inc. and drove Verizon Wireless out of its spot as the largest U.S. wireless carrier, Verizon Wireless’ performance has allowed the carrier to reintroduce some superlatives.
Verizon Wireless is touting itself as the largest U.S. carrier in terms of revenue and the operator with the largest retail customer base. Verizon Wireless earned $300 million more in wireless revenue last quarter than Cingular Wireless did, and has 54.6 million retail customers in comparison to about 53 million retail customers for Cingular.
Verizon Wireless already has bragging rights on industry-leading customer churn, and has also usually led other carriers in the number of net customer additions each quarter.
However, Cingular is still dominating in terms of sheer size. The operator now has a customer base of 58.7 million subscribers, outpacing Verizon Wireless’ 56.7 million total subscribers. Some analysts had expected that Verizon Wireless would surge ahead of Cingular as soon as this year, but Cingular has consistently outpaced its smaller rival in gross customer additions and has begun cutting its churn rate-so it is maintaining its lead, at least for now.
Current Analysis analyst William Ho said that Cingular’s turnaround correlates well with the network integration work that it has been doing since acquiring AWS. He added that Cingular’s gross adds consistently lead the industry.
“The only thing that’s hurting them is churn,” Ho said.
American Technology Research analyst Albert Lin recently estimated that Verizon Wireless will overtake Cingular in total customers within 12 to 18 months. John Byrne, analyst with industry advisory firm Technology Business Research Inc., predicted that at about this time next year, Verizon Wireless may be giving Cingular a run for its money.
Three-horse race
Sprint Nextel Corp. is lagging behind its rivals in several areas: quarterly net adds and postpaid churn, for starters. However, Sprint Nextel still has industry-leading average revenue per user, and stakes a claim on leadership in data ARPU.
“They’ve got a lot of irons in their fire,” said Ho. “They’ve got a lot of things going, and it’s taking a lot of resources.”
Sprint Nextel is ahead of Verizon Wireless and Cingular in terms of ARPU, with a postpaid retail ARPU of $61 compared to ARPUs closer to $50 for its competitors. However, both Cingular and Verizon Wireless have shown ARPU accretions in recent quarters, while Sprint Nextel has continued to see decreases in ARPU. Sprint Nextel earlier this year cut the total number of its plans and changed higher-ARPU legacy iDEN plans to mirror CDMA plans, leading a number of customers to migrate to lower-value plans. “It’s one of the downfalls, in a way, but it’s the right thing to do,” Ho said.
Sprint Nextel still holds onto its data ARPU lead in terms of dollar-for-dollar comparisons. But for data ARPU as a percentage of total ARPU, Verizon Wireless leads its rivals, which are tied at 12.7 percent. Verizon Wireless has steadily outpaced Sprint Nextel on data ARPU as a percentage of ARPU for the past three quarters, and is closing Sprint Nextel’s lead in the straight dollar measure as well. At the end of the first quarter, Verizon Wireless recorded $5.58 in data ARPU, compared to Sprint Nextel’s $7.00-a gap of $1.42. At the close of the third quarter, Verizon Wireless had cut the gap by more than 60 percent and was down by only 56 cents, with a data ARPU of $7.16 to Sprint Nextel’s $7.75.
Sprint Nextel, Byrne said, is “really not representing themselves to customers in a way that makes customers say, `Yeah, this is so compelling that I need to get this’ instead of what Verizon or Cingular has to offer.”
In addition, Sprint Nextel is struggling to hold onto its legacy Nextel customers, which make up about 22 million of its nearly 52 million customers. A dual-mode iDEN/CDMA handset is supposed to help with that. Sprint Nextel is expected to launch its first hybrid phone before the end of the year that will integrate iDEN walkie-talkie capabilities, with CDMA2000 1x voice and data capabilities. More compelling hybrid devices integrating Sprint Nextel’s higher-speed EV-DO services are not expected to hit the market until next year, at which time Sprint Nextel Chairman Gary Forsee said he expects the company to have about 4 million total hybrid handsets in its distribution channels. RCR
