With little more than a week until wireless carriers begin releasing third-quarter results, industry analysts continue to fine tune their quarterly predictions. Those updated forecasts generally are calling for more robust customer growth than originally anticipated, though most expect total growth from the industry’s nationwide operators to fall short of the more than 5.2 million customers added during the second quarter.
Among individual operators, most analysts are betting heavily on Verizon Wireless running far ahead of its competition in signing up new customers.
SG Cowen & Co. increased its estimates for the nation’s second-largest operator from its previous forecast of 1.225 million net customer additions during the third quarter to 1.8 million net customer additions in the period. The investment firm said its adjustment was based on continued strong gross customer additions by Verizon Wireless as well as continued low churn due to the carrier’s perceived “network leader” status.
Merrill Lynch released similar adjustments late last month, raising its customer growth predictions for Verizon Wireless from 1.8 million customers to 1.95 million subscriber additions. The updated forecast would be an industry record, just nipping the previous record of 1.921 million net customer additions set by Verizon Wireless during the second quarter.
While Verizon Wireless is expected to surpass previous customer-growth estimates, the industry’s No. 1 and No. 3 operators are forecast to fall short.
SG Cowen cut its forecast for Cingular Wireless L.L.C. from 1.25 million net customer additions during the quarter to just more than 1 million, though the firm said the carrier appeared to be back on track following a slower-than-expected second quarter when it added nearly 1.1 million customers. SG Cowen noted that results from an extensive retail survey found Cingular was supplying the greatest number of churned customers into the market, though the carrier’s churn results are expected to remain stable sequentially at 2.3 percent.
Merrill Lynch maintained its previous guidance of 900,000 net customer additions for Cingular during the third quarter, but noted that growth for the carrier was beginning to level off from a post-merger influx following its acquisition of AT&T Wireless Services Inc. last October.
Similar predictions of cuts were made for Sprint Nextel Corp., which pre-released third-quarter results late last month of around 700,000 net customer additions, a figure below most analysts’ forecasts. SG Cowen was expecting the carrier to add nearly 900,000 customers during the quarter, but citing its retail survey, noted a possible weakness in customers signing up for the company’s iDEN services.
Despite the shortfall, SG Cowen telecommunications analyst Tom Watts said Sprint Nextel remained the firm’s only recommended stock in the sector.
“We see upside from the Nextel merger, resolution of affiliate disputes and spin out of the local assets,” Watts said.
Sprint Nextel is in the midst of signing new affiliate agreements or buying out affiliates in an attempt to quell unrest caused by Sprint Corp.’s acquisition of Nextel Communications Inc. in early August. Sprint Nextel also is preparing to spin off its local wireline business, which is expected to generate more than $7 billion in additional revenue when completed.
Merrill Lynch cut its forecast for Sprint Nextel from 900,000 net customer additions to 800,000 subscribers prior to the carrier pre-releasing its customer-growth expectations.
No such slowdown is expected from T-Mobile USA Inc., which despite being the smallest nationwide operator by a large margin, is expected to keep pace with its larger rivals. T-Mobile USA recently surpassed the 20-million-subscriber mark and received a vote of confidence from parent Deutsche Telekom AG, which quashed rumors that it was interested in selling its U.S. wireless operations.
SG Cowen increased its expectations for T-Mobile USA from 900,000 net customer additions during the third quarter to an even 1 million. SG Cowen’s Watts said the carrier’s gross customer growth was slightly ahead of second-quarter results, while churn was expected to remain flat at 2.8 percent.
Merrill Lynch was not as bullish, maintaining its guidance of 800,000 net additions for T-Mobile USA during the third quarter.
Overall, SG Cowen said it expects the Big 4 to add just more than 4.5 million customers during the quarter, which would account for nearly 86 percent of the 5.3 million net additions it is predicting for the entire industry.
