U.S. Cellular reported improved connection growth boosted by lower churn, with lean capex helping to grow net income
Regional wireless operator U.S. Cellular reported another mixed quarterly performance, with the carrier showing the continued evolution of its operations and pressure from larger rivals.
During the recently completed second quarter, U.S. Cellular said it added 36,000 net new connections, which more than doubled the 17,000 net connections posted last year. The results came in just ahead of expectations, while gross customer additions increased year-over-year, they were down sequentially.
The latest results continued the carrier’s recent trend of strong growth in “connected devices” that accounted for 49,000 net new connections, offset by modest smartphone growth of 8,000 net additions and feature phone losses of 21,000 connections during the quarter.
On the prepaid side, U.S. Cellular showed its strongest results over the past year by adding 14,000 net connections during the quarter compared with just 8,000 prepaid net additions last year. The carrier ended the quarter with 4.973 million total connections on its network.
Helping to boost customer growth were sharp improvements in churn, with postpaid churn dropping from 1.34% to 1.2% year-over-year, while prepaid churn dipped from 5.22% to 4.86% over the same period.
Highlighting its evolving operational matrix, U.S. Cellular posted sharp drops in customer spending, with postpaid service average revenue per user falling $6.25 to $47.37, while average billing per user, including device payment fees, fell $1.97 to $56.09. Prepaid ARPU dropped $1.40 year-over-year to $34.58.
The carrier’s larger customer base allowed it to shrug off the revenue dip in posting a $4 million increase in operating revenue to $980 million for the quarter. The result included an 8% drop in service revenue offset by a 44% increase in equipment sales.
A slight dip in expenses helped U.S. Cellular post a 37% increase in net income, surging from $20 million last year to $27 million this year.
That spending drop included $93 million in capital expenses this year compared with $134 million spent in Q2 2015. For the full year, U.S. Cellular said it expects capex to come in at around $500 million, indicating a strong second-half surge in network spending.
Company management singled out the carrier’s continued work toward deploying a voice-over-LTE solution, with plans for a commercial launch early next year. The carrier noted the VoLTE service would open up opportunities for additional service revenue from its customer base as well as data roaming opportunities with fellow operators.
U.S. Cellular also may begin to see some financial benefit from its recent agreement with Google to join T-Mobile US and Sprint as network partners for the search giant’s Project Fi mobile virtual network operator service.
Investors appeared more in tune with U.S. Cellular’s operations, as the carrier’s stock (USM) closed up slightly last Friday after the results were released. The carrier’s stock plunged more than 12% following release of its first-quarter numbers earlier this year.
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