Verizon Wireless backed up its strong second-quarter customer numbers with solid financials and a new acquisition that will make the nation’s largest CDMA carrier a roaming provider for GSM services.
The carrier announced that it had agreed to buy Rural Cellular Corp. for $2.67 billion, which will add another 716,000 customers to Verizon Wireless’ base as well as extend its reach in rural markets, primarily in areas of the East Coast, South, Midwest, and Idaho, Washington and Oregon. Because Rural Cellular operates both CDMA and GSM networks across its markets, the deal gives Verizon Wireless the chance to expand its own CDMA network as well as take up a role as a GSM roaming provider, which it said it intends to do-similar to the path taken by Alltel Corp. upon its acquisition of Western Wireless Corp.
Verizon Wireless said the acquisition, which is expected to close in the first half of 2008, was expected to generate around $1 billion in synergies due to reduced roaming costs and operations expenses, as well as opportunities in new markets. The acquisition will give Verizon Wireless an additional 4.7 million licensed potential customers.
“The addition of Rural Cellular’s markets will enable us to expand our services into areas where previously we had little or no presence, and will give Rural Cellular’s Unicel customers access to the nation’s most reliable network and a broader range of voice and data services,” said Lowell McAdam, Verizon Wireless CEO.
The purchase by Verizon Wireless follows closely on the heels of AT&T Inc.’s announcement last month that it is buying regional carrier Dobson Communications Corp. for $2.8 billion. Dobson counts 1.7 million customers and operates a GSM/EDGE network, and covers almost 13 million pops in 17 Southern and Midwestern states.
Although Verizon Wireless previously announced its customer numbers for the quarter, showing 1.3 million net additions, Verizon Communications Inc. outlined the financials of its wireless business. Verizon Wireless showed revenues up 17.1% from the same quarter a year ago, to $10.8 billion. The carrier’s operating income margin rose to 27.8% in the quarter, and its retail service average monthly revenue per customer hit $51.84, a 3% increase from the same quarter a year ago. The carrier noted the improvement was driven mostly by increases in data revenue-which now makes up almost 19% of the operator’s total ARPU.
Verizon Wireless’ churn continued to stay low, with total churn of 1.08% and retail churn dipping to 0.85%; the vast majority of the carrier’s customer base, 93%, are retail postpaid customers.
Alltel hits on all cylinders
Meanwhile, Alltel reported one of its best quarters ever for customer metrics.
Alltel reported a strong quarter in which it saw its best-ever figures in wireless service revenue and churn-but profits were down 54% due to 2006’s inclusion of profits from the company’s wireline division, which Alltel has since spun off.
The carrier, which has agreed to be acquired by two private-equity firms, ended the quarter with more than 12.2 million customers. Alltel recorded postpaid net customer additions of 181,000 subscribers and said that prepaid customer additions were seasonally flat.
Total churn was at 1.67%, down from 1.91% in the previous year’s second quarter. Alltel pushed its postpaid churn down to 1.16%, from 1.47% in the second quarter of 2006. Both the total and postpaid churn numbers were the lowest that Alltel has ever recorded. The company also increased its average revenue per user, which was up $1.32 year-over-year to $54.10. Retail ARPU increased by 69 cents from the previous year’s second period, to $48.26.
Alltel’s wireless service revenues increased 14% year-over-year to $1.97 billion for the quarter, a new record for the company.
