Personal communications services operator Aerial Communications Inc. managed to decrease its historically high churn rate during the first quarter, but customer additions were less than expected.
Aerial added 20,000 customers during the first quarter, ending the quarter with 330,000 subscribers. The company’s post-pay churn rate declined from 4.3 percent the previous quarter to 3.5 percent.
Aerial President and Chief Executive Officer Don Warkentin said ongoing operational improvements reduced costs, while Aerial reported its highest customer ratings ever during the first quarter. New pricing plans introduced during the quarter should reduce the company’s need for promotional pricing going forward, said Warkentin.
“We anticipate stronger growth during the second quarter due to several factors,” he said. “First, we expect to more fully realize the positive impact of our new pricing as we will have the benefit of that pricing being in the market for a full quarter, rather than just two months. And our sales force has now fully completed the transition to selling a new proposition with a new revenue-based compensation structure.”
Sales should further strengthen as the company rolled out analog roaming April 1, with plans to introduce international Global System for Mobile communications roaming and programs targeted at business users during the second quarter, said Warkentin.
Aerial’s net income per share was 46 cents, compared with a loss of $1.21 the previous year. The company’s net income of $33.4 million was driven by an income tax benefit of $113.9 million, due to a tax settlement agreement with parent company Telephone and Data Systems Inc. Loss per share before income taxes was $1.12, compared with a loss of $1.20 the previous year.
Aerial also announced its board of directors has selected bankers to help arrange financing as it prepares to spin off from TDS. TDS in December announced plans to pursue a spinoff of its 82.3-percent interest in Aerial. Aerial’s board recently approved a tax settlement agreement with TDS, which resulted in a payment of $114.5 million to Aerial in March. TDS has said it will assist Aerial in securing financing prior to the spinoff.
U.S. Cellular
Aerial’s sister company, United States Cellular Corp., reported strong growth in customers, service revenues and operating cash flow in the first quarter. U.S. Cellular, TDS’s 80.9-percent-owned subsidiary, added 87,000 customers, ending the quarter with about 2.3 million subscribers. Service revenues increased 33 percent to $315.2 million, compared with $236.3 million the previous year. Operating cash flow increased 33 percent to $104 million.
Excluding after-tax gains on the sales of investments, net income increased 43 percent to $27.8 million. Earnings per share increased 45 percent to 32 cents per share from 22 cents per share in 1998.
TDS’s income per share from operations, excluding gains, totaled 5 cents for the quarter, compared with a diluted loss per share of 64 cents the previous year. Net income was $3 million, compared with a loss of $38.8 million in the first quarter of 1998. First-quarter 1999 results reflect Aerial losses, which reduced net income by $39.9 million in the quarter.
