The last round of third-quarter results posted last week continued to show the growing operational gaps between the country’s six nationwide carriers and the numerous rural operators that are finding a more difficult balance between customer growth and fiscal restraint.
T-Mobile USA Inc. said it added 670,000 subscribers during the third quarter, which was ahead of the 606,000 subs the carrier added during the second quarter, but short of third-quarter 2002 results when the carrier posted 869,000 subscribers to lead the industry in new adds. This year the carrier could only pull out a fourth-best showing following strong quarters by Verizon Wireless with 1.4 million net adds, Cingular Wireless L.L.C. with 745,000 new customers and Nextel Communications Inc.’s 646,000 subscriber additions.
Customer churn also crept up from 3 percent during the second quarter to 3.3 percent, which T-Mobile USA’s management claimed was due to a “significantly greater number of customers reaching their contract expiration dates in the quarter than during any past quarter.” The carrier noted the glut of customers hitting the end of their contracts was related to its strong third-quarter ’02 results that followed its launch in California and Nevada as part of a network-sharing agreement with Cingular.
Despite the slower year-over-year customer growth, T-Mobile USA posted an increase in service revenues from $1.3 billion during the third quarter of 2002 to $1.9 billion this year. The increase was fueled by a 36-percent year-over-year increase in customers as well as a $4 increase in average revenue per user to $54 and relatively flat customer acquisition costs.
While T-Mobile USA continued to show the strength of a nationwide offering, third-quarter results from a pair of rural carriers and a pair of Sprint PCS affiliates highlighted the challenges still inherent in the industry.
Dobson Communications Corp. reported a nearly 50-percent increase in total revenues during the third quarter from $151.1 million last year to $223.4 million this year, including the recent acquisition of American Cellular Corp.’s operations. Dobson added that roaming revenues, which increased from $55.8 million last year to $61.5 million this year, dropped from 37 percent of total revenues during the third quarter of 2002 to 27 percent this year, while roaming minutes increased 45 percent overall to 346.5 million minutes.
Despite the revenue increase, Dobson posted a sharp drop in net income from $19.4 million last year, a return of 21 cents per share, to a loss of $21.2 million this year, a loss of 19 cents per share. Dobson noted the third-quarter net loss included a $28.1 million loss from the early repayment of debt, $878,000 in dividends on the company’s series F preferred stock and $17.8 million of cash in in-kind dividends on redeemable preferred stock.
Net customer additions also dropped from 14,700 subscribers during the third quarter of 2002 to 12,400 customers this year, while customer churn decreased from 2 percent to 1.8 percent over the same time period.
RCC roams with T-Mobile USA
Fellow regional carrier Rural Cellular Corp. posted a year-over-year increase in total revenues from $125.7 million during the third quarter of 2002 to $136.6 million this year, bolstered by an increase in local service revenue per customer from $42 last year to $45 this year. Rural Cellular also reported a 6-percent year-over-year increase in roaming revenue, though roaming revenues’ influence on the carrier’s total revenues dropped from 28.2 percent last year to 27.5 percent this year.
Rural Cellular’s net losses increased from $5.1 million during the third quarter of 2002, a loss of 43 cents per share, to $41.1 million this year, a loss of $3.41 per share.
Customer growth increased from a loss of 1,900 subscribers during the third quarter of 2002 to 1,469 net additions this year, which left Rural Cellular with 740,484 total subscribers at the end of the third quarter.
Rural Cellular also reported last week a GSM/GPRS roaming agreement with T-Mobile USA effective through 2007, establishing Rural Cellular as a preferred roaming partner in certain markets. The deal builds on a previously announced roaming extension with AT&T Wireless Services Inc. that included Rural Cellular’s soon-to-be-deployed GSM network.
Sprint affiliates’ results mixed
Sprint PCS affiliate UbiquiTel Inc. reported similar mixed results during the third quarter that included improved financial performance offset by slower customer growth.
UbiquiTel’s total revenues increased from $61 million during the third quarter of 2002 to $72.8 million this year, while net losses dipped from $30.5 million last year, a loss of 38 cents per share, to $7 million this year, a loss of 8 cents per share.
Customer growth slumped from 18,800 net customer additions during the third quarter of 2002 to 13,200 new subscribers this year, despite a 90 basis point drop in customer churn from 4.3 percent to 3.4 percent.
UbiquiTel’s management said the carrier reached a three-year agreement with Sprint PCS covering a number of inter-carrier issues, including roaming, reseller and back-office rates that UbiquiTel said would provide immediate savings to its cost structure.
The agreement calls for UbiquiTel to continue to purchase back-office services, including billing, customer care, collections, network control center monitoring, voice mail and other network services through 2006 from Sprint PCS at an approximately 15-percent reduction over the current rate. In addition, both carriers agreed to extend their reciprocal roaming rates and the reseller rates at the current-year rate of 5.8 cents per minute through 2006.
UbiquiTel added the agreement provides a pricing process to determine new rates beyond 2006 for support services, roaming and reseller rates, provides the company certain protective rights relating to potential new capital spending requirements imposed by Sprint PCS, and a most-favored-nation provision to be offered over the next three years for all future changes that Sprint PCS offers to other affiliates of similar size.
In a related agreement, UbiquiTel and Sprint PCS said they have resolved all previously disputed charges between the two companies.
While UbiquiTel was able to balance out slower customer growth with increased revenues, US Unwired Inc. went the other way with a drop in total revenues to go along with a slight increase in new subscribers.
Total revenues fell from $148.8 million during the third quarter of 2002 to $142.9 million this year, led by a 34-percent decline in roaming revenue from $53 million last year to $35.2 million this year. US Unwired did manage to improve its net losses, which dropped from $53.8 million last year, a loss of 42 cents per share, to $31.3 million this year, a loss of 25 cents per share.
US Unwired’s customer base increased by 2,227 subscribers during the third quarter of 2002 compared with 2,656 new customers this year, which was helped by a drop in churn from 4.9 percent last year to 3.5 percent this year.
