Cingular Wireless L.L.C. kicked off the industry’s second-quarter reporting with an unexpectedly high 1.5 million net customer additions, as well as the company’s highest-ever net income of $540 million.
The nation’s largest carrier also continued to reduce its churn rate, pushing it down to 1.7 percent overall with a postpaid churn rate of 1.5 percent. Both figures were the company’s best-ever churn performance.
Cingular ended the quarter with 57.3 million customers. Postpaid customers made up more than 1 million of Cingular’s net new customers.
The carrier’s results beat analysts’ expectations.
“The results are even stronger than we expected,” analyst Tom Watts of Cowen Research wrote in a research note.
However, Cingular’s average revenue per user continued its year-over-year slide due to an increasing mix of wholesale customers in its customer base, the company said. ARPU was down 3.3 percent from the second quarter of 2005 to $48.84. But ARPU was up less than 1 percent from the first quarter of 2006. Data ARPU, meanwhile, grew 38 percent compared with the same period last year and was up 11 percent from the first quarter of 2006. Cingular’s data ARPU accounted for $5.77 of the carrier’s overall ARPU during the second quarter, and its postpaid customers had even higher data ARPU at $6.60.
Cingular also noted that it is continuing to make headway on transitioning customers from TDMA to GSM plans, with 98 percent of its network traffic and 92 percent of its customer base using GSM technology.
Cingular’s total operating revenues were $9.2 billion, with total operating expenses at $8.2 billion. Its operating revenues fell short of what some analysts had expected, mostly due to lower-than-expected equipment revenue. Equipment sales generated $923 million, or nearly 4-percent more than last year’s second quarter; meanwhile, Cingular’s costs for equipment sales ran up almost 10 percent year-over-year to $1.3 billion.
Several analysts noted that the company’s earnings before interest, taxes, depreciation and amortization margins weren’t quite up to expectations.
Capital expenditures during the quarter stood at about $1.6 billion, as the company continued to integrate its networks as well as roll out its UMTS/HSDPA mobile broadband network in several new markets.
Stan Sigman, president and chief executive officer of Cingular, said that the carrier’s net income figure in particular was an indicator of the company’s progress since its acquisition of AT&T Wireless Services Inc. in late 2004.
“This says unambiguously that the merger is not only working but delivering where it counts most—to the bottom line,” Sigman said. “Each and every quarter since the merger has been better then the one before it and serves as the benchmark for the quarter following it.”
