U.S. Cellular nets 73,000 new customers, but misses estimates

U.S. Cellular Corp. reported a strong third quarter, with average revenue per user up 10% and postpaid customer gains of about 73,000 subscribers.
However, the company missed Wall Street estimates on its earnings per share, sending its stock down sharply before rebounding. U.S. Cellular’s stock was down about 1% in early afternoon trading.
U.S. Cellular is one of a number of carriers to report in recent weeks. AT&T Mobility gained 2 million new subscribers in the third quarter and Verizon Wireless had net customer additions of 1.6 million. Sprint Nextel Corp. lost 60,000 customers, and T-Mobile USA Inc. is set to report its Q3 Thursday.
As U.S. Cellular gained postpaid subscribers, its prepaid customer base declined by 21,000 subscribers-giving it total direct customer additions of 52,000 subscribers during the quarter. Reseller customers accounted for another 5,000 customers gained. U.S. Cellular said about 95% of its retail customer base consists of postpaid customers. The company ended the third quarter with close to 6.1 million customers on its network.
The company trimmed its postpaid churn rate slightly, from 1.7% in the third quarter of 2006 to 1.6% this year; churn increased sequentially, however, from 1.4% in the second quarter of this year. The carrier’s churn results were largely in line with those of other carriers. U.S. Cellular’s data revenues jumped 66% year-over-year, fueling an ARPU boost to $52.71 during the third quarter.
“In addition, the popularity of our national and wide area calling plans helped to increase ARPU as more than half of our customer base has shifted to these high-value plans,” said John Rooney, president and CEO of U.S. Cellular. “We expect these trends to continue.”
The wireless operator’s service revenues were up 16% to nearly $1 billion, while its equipment sales revenues fell by about 8%. Operating income was up more than 30% to about $101 million, and its profits increased 77% year-over-year to $63.5 million.
The company raised its guidance for the full-year 2007. It now expects to gain between 375,000-425,000 net retail customer adds for the year, generate between $3.6-$3.7 million in service revenue, and earn operating income of between $410-$460 million.