A mixed third quarter is expected for the wireless industry, with weakness at Sprint Nextel Corp. contrasting with solid performances by AT&T Mobility and Verizon Wireless, according to a report from Cowen & Co.
Cowen & Co. analyst Tom Watts said he expects AT&T Mobility to lead in net adds-estimated at 1.8 million for the quarter-due to strong sales of the Apple Inc. iPhone. Verizon Wireless, which Watts projected will report about 1.6 million net customer additions for the third quarter, is expected to benefit from the customer losses of Sprint Nextel. Verizon Wireless still is expected to keep its industry leadership with the lowest churn rate, predicted to be around 1.1%.
Sprint Nextel has been floundering and reported recently that it expects a dismal third quarter. The company said it lost 337,000 postpaid subscribers during the third quarter and that it will fall “slightly below” its guidance on some financial metrics. CEO Gary Forsee has stepped down, and the company is seeking new leadership to help it get back on track.
Watts noted that the company’s previous plans to improve marketing, move away from subprime subscribers and improve the performance of the iDEN push-to-talk network have not been enough to boost Sprint Nextel’s performance.
“While we have been impressed by [Sprint Nextel’s] new marketing campaign and aggressive response to the iPhone, we do not expect a turn around before mid-2008,” Watts said.
Alltel’s strong results
Meanwhile, Alltel Corp. kicked off earnings from wireless carriers last Friday, when it reported a record quarter and year-over-year doubling of its postpaid subscriber gains.
Alltel added 205,000 net new customers, more then doubling the 101,000 customers it gained during the third quarter of 2006. Postpaid net additions totaled 213,000 subscribers, the company reported. Revenues jumped 14% to $2.3 billion for the quarter, with net income of $283 million. The carrier continued to improve its churn rate, with postpaid churn at 1.31%-down from 1.67% in the third quarter of 2006-and total churn at 1.9%, down from 2.18%. The company said it was the seventh consecutive quarter of year-over-year improvements in churn.
Alltel ended the quarter with about 12.1 million customers.
Alltel’s average revenue per user was up 4% from the same period of 2006, to $55.96. Data ARPU jumped 70% year-over-year and 13% from the second quarter of 2007, to $6.36.
The company said that it expects its purchase by TPG Capital and Goldman Sachs to close by the end of the year. The transaction is awaiting approval from the Federal Communications Commission, and the carrier said that it expects a favorable FCC vote soon.
