Ah, the second quarter-no big holidays and the momentum from fourth quarter sales is but a distant memory. Still, it hasn’t been an idle three months for the wireless industry: several carriers have revamped sections of their pricing plans, and mobile virtual network operators Helio L.L.C. and Disney Mobile began selling phones and service.
The industry is expected to continue its growth, but possibly more slowly than last year, according to a recent research report from Merrill Lynch-and the progress will be uneven. Sprint Nextel Corp. and T-Mobile USA Inc., for example, are not expected to do as well as Cingular Wireless L.L.C. and Verizon Wireless. Merrill Lynch sees Alltel Corp. as making choices that will benefit the company in the long term rather than maximizing its immediate returns, such as the second quarter introduction of a plan feature called MyCircle, which allows Alltel customers to select 10 numbers from any wireless or wireline carrier for unlimited calling.
The general revenue consensus is for Alltel to rake in about $2.61 billion in revenue for the quarter, or about 15 percent more than the company made last year. Alltel is expected to garner about 110,000 net new customers in the second quarter.
Verizon Communications Inc., by contrast, is anticipated to earn nearly 25 percent more than it did in last year’s second quarter; expectations for subsidiary Verizon Wireless were not broken out separately. Merrill Lynch continues to see Verizon Wireless as the “leader of the pack” and noted that in store visits, retail locations were “extremely busy” and could use additional sales representatives to shorten the wait for service.
The consensus for Sprint Nextel’s earnings was at $11.1 billion, a growth rate of just 1.3 percent over the same period last year. Sprint Nextel’s stock price dipped about $1 last week after it was downgraded from “outperform” to “neutral” by Robert W. Baird & Co. Merrill Lynch also lowered its estimate for the third-largest carrier’s postpaid additions for the second quarter and the full year 2006, from 550,000 subscribers down to 450,000 customers. The research firm concluded that Sprint Nextel “continues to struggle with its marketing message and appears to have lost momentum on the Nextel postpaid side of the brand.”
However, it added, “Boost [Mobile L.L.C.] prepaid continues to perform well” and could add another 400,000 net customers to Sprint Nextel’s roster for the second quarter. That is in line with predictions from Bear Stearns, which put its estimate of Sprint Nextel’s net additions at 800,000 customers, with nearly half that number coming from Boost. Bear Stearns analysts expect Sprint Nextel’s churn rate to hold steady at 2 percent.
Sprint Nextel made some significant changes to its calling plans in the second quarter, simplifying its voice offering and moving the start of its off-peak calling up to 7 p.m. instead of 9 p.m.
T-Mobile USA also saw Merrill Lynch lower its performance estimate on customer numbers, from 900,000 second quarter net customer additions to about 650,000 subscribers. The carrier “moved primarily to 2-year contracts in April and lost momentum in its indirect channel during that month,” Merrill Lynch analyst David Janazzo wrote in a recent research note.
Cingular, meanwhile, is likely to have stable postpaid net adds and may see higher reseller figures, Janazzo said. Merrill Lynch raised its estimates for Cingular’s total net additions for the quarter from 1 million customers to 1.25 million customers, based on “a smaller seasonal decline in reseller net additions than previously expected.”
Although the new MVNOs in the wireless space have so far been reluctant to talk about customer take-up rates and numbers, the MVNOs had a busy quarter as well. Helio and Disney Mobile began selling service, while Amp’d Mobile Inc. introduced prepaid service and announced a distribution agreement with big-box retailer Best Buy.
