The wireless industry is waiting to see how many customers are attracted to Sprint PCS Group’s wireless Internet services, but they will have to wait at least another quarter.
Sprint PCS, which launched nationwide wireless Web service in late September, said it’s too early to give numbers on how many customers are signing up for the service. But Sprint PCS President Andy Sukawaty said Sprint PCS is signing up thousands of customers a week.
“Data will be a powerful driver of demand,” said Sukawaty. “Even if customers don’t want Web services today, they want to be with a provider that offers it … We have more than 2 million data-capable phones in our customer base through October.”
Last week, the carrier announced an agreement with Ameritrade that will allow Sprint PCS customers to trade stock via their handsets. The company will continue to announce more content providers and handsets in addition to its agreements with Yahoo!, Bloomberg and CNN, said Sukawaty.
Sprint PCS is likely to top the industry in subscriber additions once again in the third quarter, having added 720,000 customers and ending the three-month period with about 4.7 million customers. More than half of the carrier’s customer base is new to the wireless industry, said Sukawaty.
“We’ve made substantial progress in the business segment with 800 business contracts of at least 100 phones each,” said Sukawaty. “Our flat-rate plans have strong appeal for the consumer segment.”
Another nationwide mobile-phone operator, Nextel Communications Inc., added 458,000 subscribers during the quarter, while AT&T Wireless Services Inc. expects to announce third-quarter results today.
Sprint PCS said it expects to add about 1 million customers during the traditional fourth-quarter holiday push. The carrier made its first entrance in the mass merchandising market with a recent agreement with Kmart stores. The agreement will put Sprint PCS handsets in more than 1,200 Kmart stores, said Sukawaty.
Analysts expect the carrier’s cash flow losses to increase and average revenue per user to decline as Sprint PCS incurs the cost of adding a high volume of customers. The cost of acquisition in the third quarter was about $400 per customer, said Sprint PCS. The operator said it expects to beat its previous goal to reduce the average customer-acquisition cost by about 20 percent.
The carrier reported $397 million in cash-flow losses during the quarter, 60 million higher than the second quarter because of greater customer acquisitions. Sprint PCS’ net loss was $615 million, or $1.31 per share, compared with last year’s loss of $176 million, or $1.04 per share. Revenues increased to $844 million from $320 million. Monthly average revenue per user stayed flat from the second quarter at $54.
Churn increased during the third quarter to 3.5 percent. Sukawaty attributed the majority of customer turnover to bad debts, but said the carrier is working aggressively to reduce churn to industry levels by next year through customer-retention teams and customer rewards programs. Coverage issues are becoming less of a reason for customers to churn, said Sukawaty. By the end of the year, the carrier will cover about 77 percent of the U.S. population, he said.
