RCC’s financials take Q4 hit

Rural Cellular Corp. posted mixed results as its losses widened, but it made major improvements in churn and customer gains.
The Minnesota-based regional carrier reported a net loss of $53.6 million for the fourth quarter of 2006, more than double the loss of $21.8 million during the same period in 2005. For the full year, RCC’s losses also increased, from $64.1 million in 2005 to $116 million in 2006.
However, the company did turn in positive customer gains and saw a large year-over-year jump in data roaming revenues during the fourth quarter. Data roaming revenues skyrocketed 320 percent from the fourth quarter of 2005, from $811,000 to $3.4 million.
The company gained around 11,000 customers during the fourth quarter and ended the year with nearly 705,700 customers. RCC credited a much-improved churn rate of 2.2 percent, down from 2.7 percent during the same period of 2005, for its positive customer numbers.
The company also gained postpaid customers, adding about 8,100 subscribers-much better than its loss of nearly 4,000 customers during the previous year’s final quarter. Of RCC’s total customer base, about 586,000 subscribers are postpaid, 9,400 customers are prepaid, and the company has about 110,000 wholesale customers.
The company’s total average revenue per user, including roaming revenues, increased from $71 to $75 year-over-year. Local service revenue also increased, but not as sharply: from $51 to $52. Company executives said during their quarterly call with analysts that they expect ARPU to grow as they introduce new data services. COO Ann Newhall said that the company is preparing to roll out a premium short code service that is expected to be an important contributor to future data revenues.
Rural Cellular’s acquisition cost per customer increased from $514 to $542. Its total revenue grew slightly from $140 million to $142 million year-over-year. RCC’s operating income fell from $25.2 million in the fourth quarter of 2005 to a loss of $8.3 million in the fourth quarter of 2006.
During the fourth quarter, Rural Cellular also agreed to acquire several southern Minnesota markets from Alltel Corp., which will increase its covered potential customers by 621,000 to 7.2 million total pops. The markets in 28 counties use CDMA technology and include about 80 cell sites, 33 distribution points and A-block cellular licenses in Minnesota rural service areas 7, 8, 9 and 10. Financial details of the deal were not disclosed, but RCC said it plans to use cash on hand to finance the purchase. The deal is expected to close during the first quarter.