Of the handful of rural carriers that reported second-quarter results last week, including Western Wireless Corp., Dobson Communications Corp., Rural Cellular Corp., Triton PCS Holdings Inc., Alamosa Holdings Inc. and US Unwired Inc., nearly all reported relatively flat roaming growth and all posted a drop in roaming revenue as a percentage of total operating revenues.
While the results follow the direction many rural carriers have said they want to take-reducing their dependence on roaming revenues-fees collected from wayward wireless subscribers still accounted for as much as 35 percent of rural operators’ total revenues.
Analysts said that despite expected step-downs in roaming rates for legacy networks, many rural carriers that have announced network overlay plans should experience stabilizing roaming revenues from recently signed long-term roaming deals, especially those signed with nationwide GSM carriers that are expected to continue to struggle with network coverage for the next several years.
“I see roaming revenue stabilizing going forward for most of the rural operators implementing GSM onto their networks as many have finalized roaming agreements through 2007,” said Tom Watts, telecommunications analyst at SG Cowen Securities.
Western Wireless, which later this year is expected to add GSM roaming traffic onto its well-diversified network, reported total domestic roaming revenue fell from $58.8 million during the second quarter of last year to $54.7 million this year. In connection with an increase in the carrier’s total domestic revenues from $222.6 million to $239.8 million over the same time frame, the carrier’s dependence on roaming revenue dropped from 26.4 percent of total revenues last year to 22.8 percent this year.
Western Wireless’ management noted that recently signed GSM roaming agreements with AT&T Wireless Services Inc., Cingular Wireless L.L.C. and T-Mobile USA Inc. should help the rural provider improve its capital structure and reduce debt in the long term.
Rural Cellular reported a similar drop in roaming revenue from $33.9 million of the carrier’s $119 million in total revenues during the second quarter of 2002 to $31.8 million of the $127.1 million in total revenues the carrier reported for the second quarter of 2003. The drop cut Rural Cellular’s roaming revenue from 28.5 percent of total revenues last year to 25 percent this year.
Rural Cellular is also expected to see some relief in the near future as the carrier announced in late June that it plans to overlay its legacy TDMA network with GSM technology and entered long-term roaming agreements with both AT&T Wireless and Cingular Wireless.
Unlike Western Wireless and Rural Cellular, Dobson reported an increase in roaming revenue from $51.3 million during the second quarter of last year to $54.4 million this year. The carrier also posted a subsequent increase in total revenues from $142.3 million last year to $154.2 million this year, Dobson’s roaming revenues dropped slightly from 36 percent of total revenues last year to 35.3 percent this year.
Dobson, which announced earlier that it was accelerating the deployment of its GSM/GPRS network overlay plans, has signed long-term roaming agreements with both AT&T Wireless and Cingular. Those deals account for more than 90 percent of the carrier’s total roaming traffic.
Similar to Dobson, AT&T Wireless affiliate Triton PCS also posted an increase in roaming revenues from $45.5 million during the second quarter of last year to $49.3 million this year. Despite the increase, the percentage of roaming revenues dropped from 24.9 percent of total revenues last year to 23.9 percent this year.
Triton PCS said it recently turned on a number of GSM markets for roaming traffic and that in addition to AT&T Wireless, which accounts for a majority of the carrier’s roaming minutes, it should see an increase in GSM roaming minutes from Cingular following an agreement signed between the two carriers last year.
Sprint PCS affiliates Alamosa and US Unwired posted significantly different roaming revenues during the second quarter, but both reported declines in its percentage of total revenues.
Alamosa’s roaming revenues increased from 33.5 million during the second quarter of 2002 to $35 million this year, but the influence on total revenues dropped from 25.6 percent to 22.5 percent.
US Unwired’s roaming revenue dropped from $49.6 million last year to $32.5 million this year, that, along with a smaller decline in the carrier’s total revenues from $144.4 million to $137.5 million, reduced the percentage of roaming revenue from 34.3 percent to 23.6 percent.
Watts noted Sprint PCS, which is the main roaming partner for both carriers, implemented a controversial reduction in roaming revenue rate from 10 cents per minute last year to 5.8 cents per minute this year, which would continue to hinder future roaming revenue growth for its affiliates.
