Increasing its advertising efforts during the fourth quarter, AT&T Wireless Services Inc. added 440,000 subscribers the last three months of 1999, ending the year with about 12 million subscribers.
The carrier had stopped advertising its services in some markets during the third quarter because of capacity problems and handset shortages, adding just 269,000 subscribers during that three-month period. AT&T Wireless’ additions during the traditional holiday push, however, fell short of the 473,000 subscribers it added in the second quarter of 1999. The carrier said it added the majority of its fourth-quarter customers in December as advertising penetrated the market.
Average revenue per user reached $66.80, lower than the third quarter’s figure of $67.90, said AT&T Corp. during a conference call with analysts last week.
“Fourth-quarter ARPU was slightly under third-quarter ARPU because we brought marketing back, and a number of new subscribers came on late in the fourth quarter,” said John Zeglis, newly appointed chairman and chief executive officer of AT&T Wireless Group, a new mobile/fixed wireless division set to go public this spring. “We had some new offers with a slightly lower revenue price point.”
Still, AT&T Wireless’ ARPU is among the highest in the industry, and Zeglis believes the company can hold or improve ARPU in 2000 by migrating customers to high-end plans like the Digital One Rate plan and offering wireless data, though the company did not give any guidance on what type of impact data services will have on
ARPUs next year.
Digital One Rate customers now number 1.8 million, while 75 percent continue to be brand- new customers to AT&T Wireless, said Zeglis.
Revenue from wireless services grew 41.6 percent in the fourth quarter as a result of consolidated subscriber growth of 33.4 percent and increased ARPU. Operational earnings before interest, taxes and depreciation and amortization (EBITDA) increased 18.4 percent to $234 million, compared with $197 million in fourth-quarter 1998. For 1999, revenue increased 41.1 percent on a reported basis to $7.6 billion and operational EBITDA increased 23.4 percent to $1.17 billion.
Zeglis said he expects the mobile-phone service division to obtain subscriber growth of more than 30 percent in 2000, with revenue growth between 20 percent and 30 percent and EBITDA growth between 35 percent and 40 percent. AT&T Wireless will spend about $3 billion to increase coverage and capacity, he said.
Zeglis said off-network roaming associated with the DOR plan, a concern of many analysts, declined from the third quarter, though rapid growth of DOR customers attributed to higher off-network roaming and handset equipment expenses, said the company.
“We are making substantial progress in off-network roaming costs,” said Zeglis. “Cost per unit declined 10 percent (from the third quarter) and 30 percent from the fourth-quarter 1998.”
AT&T Wireless also took a $529-million writedown associated with its three-vendor strategy for network equipment.
Overall, AT&T’s fourth-quarter profit fell 8.3 percent as declines in consumer long distance outweighed gains in businesses like wireless, Internet and cable TV.
