Alltel Corp. posted robust wireless results for the fourth quarter and full-year 2006, solidifying its position as the largest small player in the wireless space. However, the company’s president and CEO, Scott Ford, sparked speculation about Alltel being a possible acquisition target during remarks to analysts last week.
Ford told analysts that the company was undergoing a strategic review of “a wide span of options” that will continue for several months. He said that Alltel’s board had been presented with an overview of options and that further analysis on some of those options was continuing.
“The ongoing review touches upon all aspects of potential value creation, from balance-sheet restructuring to strategic alternatives to operational opportunities,” said Ford.
Speculative buyers for the company include Verizon Communications Inc., Sprint Nextel Corp., T-Mobile USA Inc. and private-equity firms.
Alltel reported that its wireless business added 661,638 customers during the fourth quarter-a 178-percent increase from the previous year. Most of the growth was through acquired assets, which represented 433,339 of the carrier’s total customer additions during the quarter. Internal customer growth was also robust, growing 55 percent year-over-year from 147,258 net customer additions in 2005 to 228,299 customer additions during the fourth quarter of 2006.
For the full year, Alltel added 1.161 million customers, a 43-percent drop from the previous year, though the 2005 results were bolstered by Alltel’s acquisition of Western Wireless Corp. Alltel ended the year with more than 11.6 million customers on its network.
Boosting the solid growth was a drop in customer churn from 2.2 percent in 2005 to 1.92 percent last year, and for the full year from 2.17 percent to 2 percent last year.
Alltel also posted a 1-percent increase in average revenue per user during the quarter to $52.84, while full-year ARPU increased 2 percent to $52.68.
Alltel’s total revenues jumped 13.7 percent during the fourth quarter from $1.8 billion in 2005 to $2.1 billion last year. For the full year, revenues surged 20 percent from $6.6 billion to $7.9 billion.
Q4 earnings down
Despite the strong revenue growth, fourth-quarter earnings dropped from $255.1 million in 2005, a return of 66 cents per share, to $215.9 million last year, a return of 58 cents per share. Fourth-quarter revenues were hurt by an increase in losses from discontinued operations. For the full year, net income dropped from $1.3 billion in 2005, a return of $3.87 per share, to $1.1 billion last year, a return of $2.93 per share.
Alltel executives said that the company had extended its CDMA2000 1x EV-DO coverage to 50 percent of its cell sites by the end of 2006 and planned to reach 65 percent by the end of 2007. Ford added that Alltel is in discussions with a roaming partner to deploy EV-DO Revision A, although he said that a deployment “throughout our footprint is probably an overstatement.”
Cincinnati Bell sees uptick
Cincinnati Bell had solid wireless results for the fourth quarter, including a 19-percent increase in wireless revenue for a total of $69 million. The company said that subscriber growth and increased ARPU were key factors in the revenue increase.
Cincinnati Bell’s postpaid wireless ARPU stood at $46.18, up $1.28 from a year ago or an increase of nearly 3 percent. Cincinnati Bell also reduced its churn rate from 1.8 percent in the fourth quarter of 2005 to 1.5 percent in the fourth quarter of 2006. The lower churn rate helped drive up net new postpaid subscriber numbers 6 percent year-over-year to 16,000 customers for the quarter. The company added 51,000 subscribers for the full year 2006.
In prepaid, Cincinnati Bell reported quarterly net activations of 6,000 subscribers, up from a loss of 15,000 customers in the third quarter of 2006. The company said that recently introduced rate plans helped boost prepaid ARPU to $22.71 for the quarter, up $5.03 from the previous year’s fourth quarter and a sequential increase of $3.20.
Prepaid subscriber revenue was up $2 million from 2005’s fourth quarter.
The company also offered guidance for 2007 that included $1.3 billion in revenue, with about 8 percent of the company’s revenue slated to go toward building a new data center and 3G wireless network construction.
Cincinnati Bell spent $37 million during the federal Advanced Wireless Services spectrum auction to purchase licenses covering Cincinnati and surrounding areas, plus licenses in Michigan, Illinois and Indiana.
