U.S. Cellular showed financial upside; mixed customer growth boosted by improved churn
U.S. Cellular’s aggressiveness in the mobile space against much larger rivals looks to have paid off during the third quarter, with the carrier posting solid sequential customer-growth results and improved year-over-year financial performance.
U.S. Cellular said it added 29,000 retail customers during Q3, with postpaid services adding 17,000 subscribers and prepaid another 12,000 customers. The results were down 42% from the 50,000 retail customers added during Q3 last year, but increased sequentially from the 25,000 net customers added in Q2. U.S. Cellular ended the latest quarter with more than 4.8 million customers on its network.
The latest growth was attributed to improved customer churn results, which dropped from 1.6% to 1.4% on the postpaid side and from 6.3% to 5.2% on the prepaid side. The postpaid churn improvement helped offset a 20% drop in gross customer additions, while the regional carrier noted year-over-year growth in prepaid gross additions.
In early October, U.S. Cellular updated data plans initially launched as guaranteed to “beat” data plans from Verizon Wireless and AT&T Mobility. While specifically calling out Verizon Wireless and AT&T Mobility with its promotion, both of those carriers along with T-Mobile US posted strong Q3 results of their own indicating the real victim of U.S. Cellular’s aggressiveness could have been Sprint, which is scheduled to release its quarterly results on Nov. 3.
Continued penetration of smartphone devices helped U.S. Cellular boost average consumer spending, with postpaid average revenue per user increasing $1.75 year-over-year to $58.12 and average revenue per account up a more substantial $14.01 to $147. Prepaid ARPU posted a $1.24 year-over-year increase to $35.64. Blended ARPU, including roaming charges, increased $1.39 year-over-year to $62.31.
The larger customer base and increased spending resulted in a 7% improvement in Q3 revenue, surging from $1 billion in 2014 to nearly $1.07 billion this year. U.S. Cellular also managed to cut spending 6%, resulting in $77.7 million in net income for the quarter, compared with a loss of $51.4 million last year.
The drop in Q3 spending included capital expenses, which dipped from $142.5 million in 2014 to $134.8 million this year. U.S. Cellular reported it completed its planned LTE roll out during Q3, which helped with customer retention efforts.
On the expense side, U.S. Cellular did note it took a $58.2 million credit in service revenue during the latest quarter tied to unredeemed points from the discontinuation of its loyalty program.
Looking ahead, U.S. Cellular slightly downgraded full-year revenue guidance from between $4 billion and $4.1 billion to new guidance of just $4 billion. However, the carrier increased guidance for operating cash flow from between $440 million and $540 million to new guidance of between $540 million and $620 million; and guidance for adjusted earnings before interest, taxes, depreciation and amortization from $600 million to $700 million to new guidance of between $710 million and $790 million.
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