U.S. Cellular continued to lose customers during its most recent quarter, though its rate of losses did slow. However, a combination of a smaller customer base and flat revenues caused a squeeze on the carrier’s bottom line.
U.S. Cellular said it lost a total of 71,000 customers during the third quarter, which was significantly lower than the 19,000 customers it added the previous year, but was a strong sequential improvement compared with the 127,000 customers it lost during the second quarter. U.S. Cellular ended the latest quarter with 4.875 million total customers on its network.
The latest losses were concentrated across the carrier’s postpaid customer base, which accounted for 60,000 net losses during the quarter. That result was significantly better than the 120,000 postpaid customers it lost in Q2, but still down from the 38,000 net losses during the third quarter of 2012. Impacting growth was a drop in gross additions, which have dipped across the board over the past year.
Postpaid customer churn remained steady year-over-year at 1.7%, and was down from 2% posted during the second quarter. Prepaid churn, on the other hand, shut up from 5.9% last year to 6.8% this year, but was steady sequentially. U.S. Cellular’s recently installed CEO Kenneth Meyers noted that a billing system implementation “impacted our ability to provide high-quality service to every customer for a period of time,” but that the issue has been fixed and that the carrier expects the new system to provide long-term benefits.
U.S. Cellular is set to add Apple’s iPhone lineup to its network beginning Nov. 8, which should help to at least attract customers to the carrier, which has yet to offer the iconic devices. The carrier noted that during the third quarter 65.2% of all devices sold were smartphones, which was down from the 66% posted during the second quarter, but up substantially from the 53% posted during the third quarter of 2012.
U.S. Cellular is also moving quickly to expand LTE coverage across its network, having noted in August plans to have LTE services running across its 700 MHz and 850 MHz spectrum holdings covering 87% of its customer base by the end of the year.
Customer spending inched up slightly with average revenue per user growing from $50.59 during the third quarter of 2012 to $50.92 this year, while service revenue ARPU, which also includes inbound roaming revenues, dipped from $59.34 in 2012 to $58.36 this year.
The smaller customer base and flat APRU numbers resulted in an 18% drop on total revenues to $939.2 million for the third quarter. Operating expense declined 10% year-over-year, resulting in net income attributed to shareholders plunging from a return of $35.5 million in 2012 to a loss of $9.9 million this year.
Late last month, Verizon Wireless reported that it had inked a deal with U.S. Cellular to acquire 20 megahertz of spectrum in the 1.7/2.1 GHz band covering 53 counties in 14 cellular market areas across parts of Illinois and Missouri. Financial terms of the deal were not released. During the second quarter, U.S. Cellular closed on a $480 million deal with Sprint that included the sale of network assets, spectrum and customers.
U.S. Cellular’s stock (USM) closed down nearly 3% on Friday at $47.03 per share.
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