The top spot in the contest for the nation’s largest carrier soon could be a tug-of-war. In the shadow of Cingular Wireless L.L.C. completing its $41 billion buy of AT&T Wireless Services Inc. to become the nation’s largest carrier with more than 47.6 million subscribers, Verizon Wireless posted an industry-record 1.674 million net customer additions during the quarter, driving its customer base to more than 42 million subscribers.
Verizon Wireless’ strong growth was well ahead of most analysts’ estimates of between 1.4 million and 1.5 million net customer additions for the quarter. Verizon’s subscriber adds also nearly equaled the 1.8 million customers added by four of its smaller competitors in results posted earlier this month, including both Cingular and AWS. Verizon Wireless also is on track to add more than 6 million new customers this year-1-million-plus more than the carrier added last year and more than double the growth it posted in both 2001 and 2002.
Merrill Lynch noted in a report that Verizon Wireless has accounted for approximately 38 percent of net customer additions during the third quarter among the five national operators that have reported results. That strong growth also continues to offset wireline declines at parent company Verizon Communications Inc. vs. similar troubles at Cingular’s parent companies, SBC Communications Inc. and BellSouth Corp.
“With Cingular performing less strongly and the uncertainty regarding the integration of the [AWS] transaction along with a data strategy that gives Verizon a time-to-market advantage, we continue with our relative preference for Verizon stock over its two larger RBOC peers in large part because of this differentiated wireless position,” the research firm explained.
Bolstering Verizon Wireless’ robust customer growth during the third quarter was a 6 percent year-over-year increase in gross subscriber additions to nearly 3.6 million and a reduction in customer churn from 1.85 percent during the third quarter of 2003 to 1.53 percent this year. Analysts were expecting the carrier to post around 3.4 million gross subscriber additions and customer churn of between 1.6 percent and 1.7 percent.
Verizon Wireless also managed to post a 3.1-percent increase in average revenue per user from $50.03 last year to $51.58 this year, which S.G. Cowen & Co. telecommunications industry analyst Tom Watts noted was in contrast to nearly 6-percent declines posted by both Cingular and AWS. Verizon Wireless noted that data services continued to exert a larger influence over its total revenues-increasing from 2.3 percent during the third quarter of 2003 to 4.7 percent this year.
Watts also estimated that Verizon Wireless’ cost per gross subscriber addition increased 9.4 percent year-over-year from $256 during the third quarter of 2003 to $280 this year, while the cash cost per user fell more than 4 percent from $21.86 last year to $20.97 this year.
In addition to its operational metrics, Verizon Wireless posted a 23-percent increase in total revenues, from $5.9 billion during the third quarter of 2003 to $7.3 billion this year. The carrier added that data revenues contributed $300 million in the quarter with more than one-third of customers spending an average of $7 per month on data services.
A strong quarter on a slightly smaller scale was reported last week by Nextel Partners Inc. and Sprint PCS affiliate UbiquiTel Inc.
Nextel Partners said it added a company-record 93,500 new subscribers during the third quarter and ended the first nine months of the year with just over 1.5 million total customers. The carrier noted subscriber growth was helped by a steady 1.4-percent customer churn result that is among the lowest in the industry.
Total revenues increased more than 27 percent during the third quarter from $280.9 million in 2003 to $357.5 million this year, fueled by its strong customer growth compensating for a slight dip in ARPU from $70 during the third quarter of 2003 to $68 this year. Net income also improved from a loss of $22 million during the third quarter of 2003, a loss of 9 cents per share, to a return of $35.5 million this year, or a return of 12 cents per share.
UbiquiTel said it added 17,500 subscribers during the third quarter compared with 13,200 customers added last year, and managed to improve customer churn from 3.4 percent during the third quarter of 2003 to 2.9 percent this year. The carrier noted that 93 percent of net subscriber additions during the quarter were in prime credit classes compared with 90 percent last year.
Total revenues increased more than 34 percent from $72.8 million during the third quarter of 2003 to $97.7 million this year, while net income jumped from a loss of $7 million last year, a loss of 8 cents per share, to a return of $1.6 million this year, or a return of 2 cents per share.
