The wireless industry’s record customer growth during the final three months of 2004 received contributions last week from a regional operator and a pair of affiliates, showing-though proportionally smaller than the numbers posted by the industry’s heavyweights-that there is still room for growth regardless of size.
Regional wireless operator U.S. Cellular Corp. said it added 150,000 net customers during the fourth quarter, in line with estimates and ahead of the 141,000 subscribers the carrier added in fourth-quarter 2003. The year-over-year increase was boosted by an 11-percent jump in gross subscriber additions that offset an increase in postpaid customer churn from 1.4 percent during the fourth quarter of 2003 to a still low 1.6 percent last year.
For the full year, U.S. Cellular posted a 40-percent increase in net customer additions-from 447,000 subscribers in 2003 to 627,000 net additions last year. U.S. Cellular said it ended 2004 with 4.95 million subscribers, placing the carrier as the nation’s seventh largest operator.
Jay Ellison, U.S. Cellular’s executive vice president of operations, noted that the robust quarterly growth was seen across all of the carrier’s regions as well as the three new markets the carrier launched in the third quarter-Oklahoma City; Lincoln, Neb.; and Portland, Maine.
Ellison added that U.S. Cellular’s operations saw little impact from the ramp-up of industry consolidation during the fourth quarter.
“I don’t think the quarter was more competitive due to consolidation, but there might have been more customer uncertainty as the merged companies looked for their place in the industry,” Ellison said.
U.S. Cellular’s strong growth also showed up in the carrier’s cost per gross addition results, which increased from $384 during the fourth quarter of 2003 to $442 last year. Ellison noted that the increase was spurred by customers increasingly selecting more advanced handsets that take advantage of the carrier’s CDMA2000 1x network, adding that data services contributed 3.4 percent to the carrier’s service revenues.
U.S. Cellular also reported that total revenues increased 7.7 percent from $668.1 million during the fourth quarter of 2003 to $719.5 million last year, though fell short of estimates of approximately $750 million in total revenues. Full-year revenues jumped 10 percent from $2.6 billion in 2003 to $2.8 billion last year.
More impressively, fourth-quarter net income nearly doubled from $20.6 million in 2003, or 24 cents per share, to $40.5 million last year, or 47 cents per share. Full-year net income jumped from $42.7 million in 2003, or a return of 49 cents per share, to $109 million last year, or $1.26 per share.
Sprint affiliates
While U.S. Cellular continued to show the strength of the industry’s larger regional carriers, Sprint PCS’ affiliates posted mixed results.
AirGate PCS Inc., which is in the process of being acquired by fellow affiliate Alamosa Holdings Inc., reported a 13.1-percent increase in revenues during its first fiscal quarter ended Dec. 31-from $81.5 million in 2003 to $92.2 million last year.
Despite the increased revenues, net income dropped from $173 million during the final three months of 2003, a return of $33.32 per share, to a loss of $15.3 million last year, or a loss of $1.30 per share. AirGate noted that net income in 2003 was positively affected by a $184.1 million non-monetary gain from getting rid of some discontinued operations resulting from eliminating its investment in former subsidiary iPCS Inc. Without the charge, AirGate posted an $11.1 million net loss in 2003.
Net customer additions increased more than 3,500 percent year-over-year from 438 subscribers during the final three months of 2003 to 15,775 net customer additions last year. The strong growth was attributed to a 46-percent increase in gross customer additions from 35,601 subscribers in 2003 to 51,931 customers last year, and a drop in customer churn from 3.1 percent to 2.72 percent.
Fellow affiliate UbiquiTel Inc. reported 15,100 net customer additions during the fourth quarter of last year, which was short of the 22,700 customers the carrier added during the fourth quarter of 2003 and below estimates of around 22,000 net subscriber additions. Contributing to the shortfall was a 6.4-percent year-over-year drop in gross subscriber additions, which was just enough to offset a drop in customer churn from 3.1 percent during the fourth quarter of 2003 to 2.9 percent last year.
The carrier noted that it churned 1,500 sub-prime credit class customers during the fourth quarter. Analysts attributed that to a shift of lower-credit customers going to Virgin Mobile USA L.L.C.’s prepaid offering, which recently launched service in a number of UbiquiTel markets. UbiquiTel said it ended 2004 with 76 percent of subscribers in prime credit classes compared with 74 percent at the end of 2003.
UbiquiTel also reported that its cost per gross addition increased 12.5 percent to $505 during the fourth quarter of 2004 due to the shortfall in net customer additions.
Fourth-quarter revenues increased nearly 30 percent from $75.9 million in 2003 to $98.3 million last year, including a 24-percent increase in subscriber revenues and 58-percent increase in roaming and wholesale revenues. Net losses also improved from a loss of $8.5 million during the fourth quarter of 2003, or a loss of 9 cents per share, to a loss of $1.4 million last year, or a loss of 1 cent per share.
