Cingular Wireless L.L.C.’s tenure as the nation’s fastest-growing wireless operator came to a screeching halt as Verizon Wireless took back the title it lost in 2004.
Surpassing even the most optimistic forecasts, Verizon Wireless said it added 1.64 million subscribers during the first quarter, ending March with 45.5 million subscribers. The results topped the 1.4 million net additions Cingular posted for the first quarter, as well as the 1.39 million subscribers Verizon Wireless added during the first quarter of 2004.
Analysts were expecting Verizon Wireless to post around 1.4 million net customer additions for the quarter.
The strong customer growth was attributed to a 6-percent increase in gross subscriber additions from 3.2 million last year to 3.4 million and a sharp reduction in customer churn from 1.6 percent to 1.3 percent. Verizon Wireless added that its customer growth included 1.58 million direct subscribers, which was a 31-percent improvement compared with the first quarter of 2004.
Analysts noted the robust customer growth-more than 3 million customers-posted by the industry’s two largest operators bodes well for the overall health of the wireless market.
“Wireless is not suffering from Cingular’s revival,” said American Technology Research analyst Albert Lin. “Some may have feared that Cingular’s rebound could come at the expense of Verizon. We conclude the industry is just in a better state of health than we thought as both giants are doing well.”
In addition to its strong customer growth, Verizon Wireless also posted a 2-percent jump in average revenue per user from $48.04 in first-quarter ’04 to $49.03 this year. Data services contributed $416 million in revenues during the first quarter, or more than $3 in ARPU, and total data customers increased 53 percent year-over-year to 17.8 million subscribers.
Analysts were bullish on Verizon Wireless’ increased data contributions, but noted the carrier still trailed the $4 in data ARPU generated by Cingular and more than $6 in data ARPU reported by Sprint Corp.
Verizon Wireless’ total wireless revenues surged more than 20 percent in the quarter from $6.2 billion in 2004 to $7.4 billion this year. Wireless revenues as a total percentage of parent company Verizon Communications Inc.’s revenues also increased from 36.1 percent last year to 40.8 percent this year. Wireless income jumped more than 36 percent year-over-year from $318 million to $433 million, while operating income margins improved from 19.5 percent to 20.8 percent.
While Verizon Wireless posted industry-leading growth, Nextel Communications Inc. reported a quarterly record 810,000 net additions during the first three months of this year. Nextel’s customer growth included 496,000 customers through Nextel-branded services and 314,000 customers to its Boost Mobile prepaid offering. Nextel ended the quarter with 17 million subscribers on its network, including 15.5 million direct Nextel customers and 1.5 million Boost Mobile subscribers.
Analysts were expecting Nextel to add between 450,000 and 500,000 direct subscribers during the quarter, in line with the 474,000 direct customers the carrier added in first-quarter 2004.
The carrier’s branded service posted a year-over-year improvement in customer churn from 1.7 percent during the first quarter of 2004 to 1.5 percent this year, while ARPU dropped from $69 last year to $67 this year. Analysts were expecting the carrier to post customer churn of between 1.5 percent and 1.6 percent and ARPU of between $67 and $68.
Nextel also reported operational metrics for Boost Mobile for the first time, including 5-percent customer churn and $41 in ARPU. Boost’s customer churn was comparable to other prepaid offerings, while ARPU was nearly double traditional prepaid results.
Nextel’s total revenues jumped more than 16 percent from $3.1 billion during first-quarter 2004 to $3.6 billion this year. Despite the increase, net income dropped slightly from $593 million during the first quarter of 2004 to $589 million this year, though earnings per diluted share remained stable at 52 cents. The drop was attributed to a $4 million increase in mandatory stock dividends and accretion.
Nextel also noted that it spent $86 million in the quarter preparing for its spectrum rebanding efforts at 800 MHz. The carrier previously stated that the rebanding effort could total more than $3 billion. Nextel’s management added that its pending merger with Sprint Corp. is still on track to close by the end of the year, and that it could gain government approval as early as August.
Nextel Partners
Nextel’s network affiliate Nextel Partners Inc. posted similarly strong first-quarter results led by a company-record 99,400 net customer additions, compared with the 88,800 customers the carrier signed in first-quarter 2004. Nextel Partners ended the quarter with more than 1.7 million subscribers.
John Chapple, Nextel Partners president and chief executive officer, said the carrier is postponing the deployment of Boost Mobile services into its network until at least 2006 due to back-office integration issues. Chapple said the carrier would expand its automatic spending limit program that was initially tested in Texas, targeting small and medium-sized businesses.
Customer churn dipped from the 1.5 percent in first-quarter 2004 to 1.4 percent this year, but increased sequentially from the 1.3-percent churn Nextel Partners reported last quarter. ARPU remained steady at $67, marking the first time that ARPU remained stable sequentially between the fourth and first quarters.
Revenues climbed more than 31 percent from $308.1 million in first-quarter 2004 to $404.1 million this year, ahead of the $385 million forecast by analysts. Roaming revenues contributed 12 percent to the total for the quarter.
Nextel Partners also reported $56.5 million in net income for the quarter, a return of 19 cents per share, a 15-fold increase compared with the $3.5 million posted last year.
U.S. Cellular
Regional wireless operator U.S. Cellular Corp. reported mixed results. The carrier said it added 182,000 customers in the quarter, short of the 196,000 customers added in the first quarter of last year, but ahead of analysts’ estimates. U.S. Cellular noted that its customer growth included 59,000 reseller customer activations during the first quarter of this year compared with 52,000 resell net additions last year.
U.S. Cellular ended March with more than 5.1 million customers.
The subscriber growth shortfall was attributed to an increase in postpaid customer churn from 1.3 percent in first-quarter 2004 to 1.5 percent this year, which offset a 5.8-percent increase in direct gross subscriber activations from 345,000 customers in 2004 to 365,000 customers this year.
ARPU dropped nearly $2 from $46.16 to $44.28. In part, the decrease was due to a 38-percent decrease in inbound roaming revenue per customer from $3.17 in 2004 to $1.98 this year, which offset an increase in long-distance/other revenue per unit from $2.73 in 2004 to $3.26 this year. U.S. Cellular noted that data revenues increased from $11 million during the first quarter of 2004 to $29 million this year, which analysts said contributed around $2 in ARPU this year.
Despite the ARPU shortfall, revenues increased 7.7 percent from $657.7 million during the first quarter of 2004 to $708.4 million this year. The growth was led by an 8-percent jump in service revenues from $619.4 million in 2004 to $668.8 million this year.
Net income jumped 83 percent from $9.2 million during the first quarter of 2004, or 11 cents per share, to $16.9 million this year, or 19 cents per share. RCR
