Prepaid, resale boost Cingular’s record quarter

Cingular Wireless L.L.C.’s last quarter before being absorbed by parent company AT&T Inc. resulted in a company-record 2.4 million net customer additions, up from 1.8 million net adds a year ago and beating analysts’ expectations.
“Our last quarter as a joint venture under the Cingular name was our best ever on a variety of fronts,” said Cingular President and CEO Stan Sigman.
The carrier’s growth was driven in large part by new prepaid subscribers and those gained from its resellers, numbers that made up nearly 1.5 million of its customer additions during the fourth quarter. Cingular’s own prepaid service garnered a record 746,000 customers, and Cingular resellers accounted for another 750,000 subscribers. Cingular ended the year with 61 million customers on its network.
Helping to bolster the strong growth was a drop in the carrier churn rate from 2.1 percent in the fourth quarter of 2005 to 1.8 percent in 2006; that churn rate was flat sequentially. Cingular said its postpaid churn rate was 1.5 percent for the fourth quarter of last year.
Even with the prepaid mix, Cingular increased its average revenue per user year-over-year from $48.86 during the fourth quarter of 2005 to $49.29 last year. ARPU was down slightly however from the $49.76 the carrier recorded during the third quarter of 2006. Cingular’s data ARPU was strong, increasing 53 percent from the year-ago quarter and 14 percent sequentially to end up at $7.19, or nearly 15 percent of the carrier’s total ARPU.
In a call with analysts, Cingular officials noted that considering the quality of their network, the company likely will not consider a low-cost, unlimited plan designed to compete with the offerings of Leap Wireless International Inc. and other flat-rate carriers. Sprint Nextel Corp. CEO Gary Forsee noted earlier this year that the No. 3 carrier was looking at launching a flat-rate, unlimited local calling service in a handful of markets to absorb customers migrating from the carrier’s core service.
Cingular’s net income soared to $782 million, a 283-percent increase from the $204 million that the carrier reported during the fourth quarter of 2005. The number was down though from the $847 million Cingular reported in the third quarter of 2006. The carrier’s profits for the year were about $2.5 billion, a significant increase from the $333 million posted for 2005.
Cingular’s total revenues jumped more than 10 percent from the same quarter last year, and increased nearly 9 percent for the full-year 2006 compared with the full-year 2005. However, Technology Business Research Inc. analyst Ken Hyers pointed out that while service revenues were up more than 13 percent from the same period in 2005, they increased only 1.5 percent from the third quarter to the fourth quarter-probably as a result of the preponderance of prepaid subscribers.
Wall Street responded well to Cingular’s results, pushing AT&T’s stock from around $35 per share early in the week to more than $37 on Thursday before falling back to around $36.25 by the end of last week.
The positive momentum was seen as a good way for AT&T to begin following its recent acquisition of former Cingular joint venture partner BellSouth Corp.
“We believe 2007 will be a strong year for AT&T’s wireless business,” said Cowen & Co. analyst Tom Watts in a research note, adding, “We believe Cingular’s focus on customer satisfaction, network performance, and exclusive hardware deals . should continue to drive subscriber outperformance.”
Consolidated results for AT&T included net income of $1.9 billion for the fourth quarter, up more than 17 percent year-over-year. The company reported that it achieved merger expense savings of $1 billion following SBC Communication Inc.’s acquisition of AT&T Corp., outpacing its own forecast of $600 million to $700 million.
AT&T said it saw solid growth in its regional business operations and progress on its broadband and video services initiatives. The company expects to realize between $2.8 billion and $3.6 billion in synergies from the SBC/AT&T and the AT&T/BellSouth deals in 2007 alone.