How best to count prepaid subscribers became one of Omnipoint Corp.’s main focuses for reporting third-quarter results after it acquired 35,000 prepaid customers Sept. 30 from reseller Urban Wireless.
The combination of Urban Wireless’ prepaid customers with its own substantial base of prepaid users leaves Omnipoint with about half its total subscribers on prepaid plans and no easy answers about how to report them.
Traditional indicators of customer numbers, such as churn and average revenue per unit, don’t work because prepaid customers don’t behave like traditional customers, said Douglas Smith, chairman and president of the company. Prepaid customers sometimes buy airtime sporadically and can go months without using their service.
Until the industry and the financial community offer a way to report prepaid customers, Omnipoint is using its own system for tracking and reporting its customer base. The company moved certain groups of customers-based on their activity during the third quarter-from active status in its Home Location Register to a part of the system that tracks those prepaid customers without immediately purging them.
For financial analysis, Omnipoint “removed” 18,000 of Urban Wireless’ 35,000 subscribers and 20,000 of its own prepaid subscribers who began the quarter as customers but had no usage during the quarter and appeared unlikely to re-up their purchase of coupons, said the company. Some of those customers, said Omnipoint, still could buy a coupon and use their service during the fourth quarter, but they are removed from the company’s reported subscriber count.
“Most wireless companies which provide service to significant numbers of prepays count them as subscribers for six months to one year after their last coupon is consumed,” said George Schmitt, president of Omnipoint Communications Services Inc. “We are using a 90-120 day period and individually reviewing the accounts to estimate the likelihood of renewals.”
The company also removed about 3,500 fraudulent subscribers. International fraud, which stung Omnipoint last quarter, was held to an average of $50,000 per month, said the company.
Excluding Urban Wireless, but including proportionate subscribers, Omnipoint’s base totaled 253,000 at the end of the quarter from 213,000 at the end of the second quarter. Overall ARPU was $47.
Omnipoint also introduced new bundled-minute pricing plans during the quarter. Between 50 percent and 70 percent of new subscribers are opting for the bundled-minute plans, with many selecting the higher-end plans, said Schmitt.
Net loss for the quarter was $157 million, or $2.98 per share, compared with a $180.3 million, or $3.43 per share, net loss in the second quarter. Net loss increased from $81.2 million, or $1.57 per share, in the third quarter of 1997.
The company’s net loss during the quarter included $4.2 million in expenses related to customer acquisition costs for Urban Wireless and $3.9 million for temporary outsourcing of personnel to handle increased call volumes resulting from the acquisition.
Third-quarter revenue totaled $42.2 million, an increase of 205 percent from $13.8 million during the third quarter of 1997.
