With wireless carriers expected to begin announcing first quarter results this week, accounting-challenged U.S. Cellular Corp. reported much-delayed fourth quarter results as well as limited first quarter results.
The carrier said it added 86,000 net subscribers during the final three months of 2006, which was a significant drop from the 125,000 customers the carrier added during the fourth quarter of 2005. U.S. Cellular ended 2006 with around 5.8 million customers on its network, including 590,000 indirect subscribers. The customer addition shortfall was impacted by a drop in gross customer addition that offset a drop in postpaid customer churn from 1.6 percent to 1.5 percent.
Average revenue per user surged $2.21 year-over-year to $48.15, while marketing costs per gross addition jumped from $498 during the fourth quarter of 2005 to $511 in 2006.
“Thanks to our increasingly popular easyedge data platform and text messaging service, data revenues in the fourth quarter increased 65 percent year-over-year, and accounted for 6 percent of service revenues, or $217 million, in 2006 compared to 4.6 percent in 2005,” said U.S. Cellular President and CEO John Rooney. “This, plus increasing customer adoption of our new national, family and wide-area calling plans, helped drive a 5 percent year-over-year increase in ARPU.”
The ARPU gains helped push U.S. Cellular’s operating revenues up nearly 15 percent from $785.2 million during the fourth quarter of 2005 to $902.1 million in 2006. However, operating expenses increased 16.6 percent over the same time frame, cutting operating income from $66.2 million in 2005 to $63.6 million last year. Net income also dropped from $61.2 million in 2005, a return of 70 cents per share, to $54.1 million during the fourth quarter of 2006, or 61 cents per share.
For the year U.S. Cellular posted a 14.6-percent increase in revenues from $3 billion in 2005 to $3.5 billion in 2006. Operating income also increased more than 25 percent from $231.2 million in 2005 to $289.9 million last year, with net income jumping 15.8 percent from $155 million, a return of $1.77 per share, to $179.5 million, a return of $2.04 per share.
U.S. Cellular also reported that it added 146,000 net customers during the first quarter of 2007 compared with the 122,000 customers it added during the first three months of 2006. The carrier said it expects to add between 375,000 and 425,000 customers for all of 2007, with service revenues of approximately $3.5 billion, operating income of between $375 million and $425 million and capital expenditures of between $600 million and $615 million.
While U.S. Cellular was getting up-to-date on its financial reporting, the carrier’s parent company Telephone and Data Systems Inc. said it plans to restate prior financial statements to correct accounting for repurchased shares of U.S. Cellular. TDS said it should have applied step acquisition accounting to share repurchases in 2000 and 2001.
As a result of the delays and restatements, TDS said it was in default of certain revolving credit agreements and forward contracts, but that it has received an extension to file its 2006 10-K until June 30, and first quarter 2007 10-Q report within 45 days of filing its 10-K.
TDS’ stock was trading up 50 cents per share early Monday at $60.70 per share.
U.S. Cellular posts mixed Q4 results, TDS still struggling with accounting
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