The U.S. wireless industry is on track to chronicle its best-ever quarterly customer growth, with more than 5.4 million net adds already reported by four of the largest carriers. In a record-smashing quarter, Verizon Wireless clocked 2 million net customer additions to pull past Cingular Wireless L.L.C.’s blockbuster results of 1.8 million net adds. T-Mobile USA Inc. gave its own best-ever showing by bringing in 1.4 million net wireless customers. Churn was down, data revenues were up and carriers’ wireline parents benefited from the bounty.
But the silver lining did have its cloud. Average revenue per user shrank slightly for both Verizon Wireless and Cingular; T-Mobile USA and Alltel Corp.-which reported results in mid-January-both registered an increasing percentage of prepaid customers; and much of Cingular’s growth came from customers added through resellers.
A more detailed breakdown reflects:
Verizon Wireless continued its streak of 14 consecutive quarters with double-digit growth, with its customer net adds up 20.5 percent over the fourth quarter of 2004. For the full year of 2005, Verizon Wireless added more than 7.5 million net customers, up 19.5 percent over 2004.
The New Jersey-based carrier reported that its total revenues increased 18.3 percent from the same quarter of 2004 to $8.7 billion in 2005, and that its wireless operating income margins were 25.8 percent for the fourth quarter and 22.8 percent for the year. ARPU was $49.36 for the quarter and $49.49 for the year, sliding 1.9 percent from the fourth quarter of 2004 and 1.5 percent year-over-year.
Verizon Wireless’ data services revenue for the year was $2.2 billion, more than double its 2004 figure. The fourth quarter’s contribution was $731 million, up 5.6 percent from the prior year’s quarter.
The No. 2 U.S. carrier reduced its churn rate from 1.4 percent during the fourth quarter of 2004 to 1.2 percent in 2005; its churn rate for the year was 1.3 percent, down from 1.5 percent for 2004. The carrier previously reached the 1.2 percent churn mark during the second quarter of 2005. Verizon Wireless did not break out postpaid and prepaid growth, but it did note that 1.8 million of its net adds during the fourth quarter-and 95 percent of its subscriber base-were retail customers, as opposed to reseller customers. Verizon Wireless ended the year with 51.3 million wireless customers.
Supported by Verizon Wireless’ adds and 613,000 net new broadband connections, Verizon Communications Inc.’s quarterly results fell in line with predictions, with fourth-quarter earnings of $1.7 billion and 59 cents per share. Those numbers were down 45 percent from the same quarter last year, when Verizon sold off some assets and realized a tax gain.
Cingular racked up 1.82 million net adds during the fourth quarter, more than double the number posted in the third quarter of 2005 and 7.1-percent more than the 1.7 million that it picked up during the same time last year. However, retail customers accounted for only about 47 percent of the carrier’s net adds, while the rest came from resellers.
The carrier also recorded its lowest ever quarterly churn rate of 2.1 percent during the final three months of 2005; postpaid churn was at 1.9 percent. Average churn for the year settled at 2.2 percent, down from 2.7 percent for 2004.
Cingular, too, saw a decline in its ARPU, which checked in at $48.86 for the fourth quarter, down 2.2 percent from pro forma ARPU from the same quarter last year. However, data ARPU came in at $4.71, up 63 percent from the fourth quarter of 2004 and a 9-percent increase from the third quarter of 2005.
Cingular’s ARPU “reflects continued pressure on voice revenue as the wireless market becomes more penetrated and lower-revenue customers enter the category, though these impacts were substantially offset by continued increase in data ARPU,” the company reported.
Ric Prentiss of Raymond James & Associates Inc. predicted that data will become increasingly important in 2006, as new subscribers become tougher to find. He said the U.S. wireless industry likely will shift its focus from net adds to cash flow and driving up ARPU through data services.
Cingular closed out the year with 54.1 million wireless customers, 5 million more than last year.
Growth at Cingular accounted for good numbers at the post-merger AT&T Inc., which, like Verizon Communications, is relying on wireless and high-speed Internet to make up for wireline phone losses. AT&T reported a profit of $1.66 billion, which translated into adjusted per-share net income of 46 cents per share.
T-Mobile USA reported its own record net additions of 1.4 million customers during the fourth quarter, and about a third of those, or 34.5 percent, were prepaid customers. T-Mobile USA managed to reduce its fourth-quarter combined churn to 2.9 percent from 3.1 percent in 2004; postpaid churn was 2.3 percent for the quarter, improved from 2.6 percent at the same time last year, while prepaid churn held steady at 6.6 percent. T-Mobile USA wrapped up 2005 with a 21.7 million customer base that is 85 percent postpaid.
