Alltel Corp. reported weaker-than-expected total earnings, but still outpaced analysts’ predictions by adding 147,000 net new wireless subscribers, most of which were prepaid.
Alltel reported consolidated revenue of $2.58 billion, a 21-percent jump from 2004’s fourth quarter. However, net income fell to $255.1 million (66 cents per share) from $270.6 million last year (89 cents per share). The carrier stated fully diluted earnings for the quarter of 77 cents per share from current businesses. Most analysts had expected that figure to be around 83 cents per share.
The majority of Alltel’s net customer adds were prepaid users, with 90,000 of the 147,000 net new wireless subscribers not signing a contract. Alltel lost only 37,000 subscribers from former Cingular Wireless L.L.C. markets that Alltel transitioned from GSM to CDMA technology. Some analysts had predicted the rural carrier would lose all 119,000 customers in those areas. Alltel added 18,000 subscribers in former Western Wireless Corp. markets.
Alltel posted customer churn of 2.2 percent for the quarter, up from 2.17 percent in fourth-quarter 2004. For the year, Alltel had total wireless churn of 2.17 percent, down from last year’s 2.23 percent. Average revenue per user for the quarter stood at $52.13, up 6 percent from the same quarter the previous year. Yearly ARPU was up 7 percent from 2004 to $51.44.
The carrier reported a wireless operating margin of 17.1 percent in the fourth quarter of 2005, down 13 percent from the same quarter in ’04. Several analysts expressed concern about decreases in Alltel’s wireless margins, and company officials said that margins would be addressed Feb. 1, when Alltel has its scheduled analyst day.
Simon Flannery of Morgan Stanley & Co. said Alltel produced strong wireless net adds, but at the expense of lower margins. He added that Alltel’s prepaid growth was particularly impressive since Alltel had been losing prepaid customers during the third quarter.
Alltel also reported nearly $10 million in costs associated with Hurricane Katrina during the fourth quarter.
As far as revenue from Alltel’s data offerings, the company reported that about 5 percent of ARPU, or $2.58, came from wireless data, and the carrier was seeing double the download traffic on 3G-enabled phones compared with other handsets. While most of Alltel’s customers have access to CDMA2000 1x technology, the carrier has launched higher-speed EV-DO services in a dozen markets.
In 2005, Alltel completed transactions with Cingular, PSC Wireless, Western Wireless and U.S. Cellular Corp., as well as announcing that it was spinning off its wireline business in a $9.1 billion deal that would leave the rural carrier as a wireless-only business. The company expanded its footprint to include 76 million potential customers and now has a customer base of more than 10 million subscribers.
