Regional wireless operator U.S. Cellular reported second quarter financial results overshadowed by recent news involving asset sales and changes of leadership.
The carrier, which recently sold its operations in its hometown of Chicago and other Midwest markets to Sprint for $480 million, said it lost 127,000 customers during the second quarter, including 120,000 postpaid and 7,000 prepaid subscribers. That compared with a loss of 28,000 customers during the second quarter of 2012, which included the loss of 48,000 postpaid customers offset somewhat by a gain of 20,000 prepaid subscribers. Over the past four quarters U.S. Cellular has lost 273,000 postpaid customers, but has gained 110,000 subscribers to its prepaid offerings.
Impacting its customer numbers has been a steady decline in gross customer additions as well as an increase in customer churn. Postpaid churn surged from 1.6% during the second quarter of 2012 to 2% this year, while prepaid churn increased from 6.2% to 6.8% over the same time frame.
U.S. Cellular’s churn and gross customer addition results could see a turnaround later this year as the carrier is set to add Apple’s iPhone devices to its portfolio, as well as plans to offer shared data rate plans similar to those offered by larger rivals. U.S. Cellular had initially refrained from offering Apple products, citing high costs associated with subsidizing devices for consumers. However, a more likely reason was that the CDMA version of the iPhone 5 launched last year did not provide LTE support for the lower 700 MHz spectrum band U.S. Cellular uses for its LTE network, though it does support the 850 MHz band the carrier is adding to support LTE services.
Overall service average revenue per user, including roaming costs, dropped $1.01 year-over-year to $57.88, though that amount did increase 74 cents sequentially. A smaller customer base combined with lower ARPU resulted in a 10% year-over-year decrease in total revenues, which dropped to $995.1 million for the second quarter. U.S. Cellular did manage to cut operating expenses by 24% year-over-year, which boosted net income from $52.7 million in 2012 to $143.4 million this year.
Looking ahead, U.S. Cellular said it plans to continue expanding the deployment of its LTE service using its 700 MHz spectrum licenses as well as using some of its 850 MHz spectrum to “provide additional capacity for future growth in data usage, enable potential future … LTE roaming, and support the sale of Apple products.” The carrier said it expects its LTE network to reach 87% of its customer base by the end of the year.
The carrier also said it plans to continue monetizing “non-strategic” assets, including towers and spectrum. U.S. Cellular’s asset sale to Sprint included spectrum assets in the 1.9 GHz band, and recently announced plans to sell 10 megahertz of spectrum in the 1.7/2.1 GHz band to T-Mobile US for $308 million. The moves highlight the carrier’s focus on tapping its sub-1 GHz spectrum holdings to support future network plans.
The regional wireless space has gone through some recent upheaval as earlier this year MetroPCS was gobbled up by T-Mobile US and more recently AT&T announced plans to acquire Leap Wireless. Those deals have left few players in the mid-size carrier space and have propelled U.S. Cellular farther up the list of facilities-owning wireless operators.
At the end of the second quarter, U.S. Cellular CEO May Dillion resigned and was quickly replaced by Kenneth Meyers, who had previously served as EVP and CFO of U.S. Cellular parent company Telephone and Data Systems, and has previous stints at both operations dating back to 1987.
U.S. Cellular ended the first half of the year with 7,748 total towers supporting its network, which was down from 7,932 last year, while its total owned towers had increased year-over-year from 4,346 in mid-2012 to 4,411 towers this year.
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