With the deadline for reporting first-quarter results last week, a number of carriers posted financial and operating results including another strong showing from nationwide provider T-Mobile USA Inc. and mixed results for rural operators.
Seeming to be saving the best for last, T-Mobile USA Inc. posted the largest customer growth for the third straight quarter as the smallest nationwide operator said it added 927,000 net customers during the first quarter. Analysts expected T-Mobile USA to add nearly 800,000 customers during the quarter.
With the nearly 2 million customers the carrier added during the two previous quarters, T-Mobile USA served more than 10.8 million total customers at the end of the first quarter and is just behind Nextel Communications Inc.’s 11.1 million customers as the fifth-largest carrier in the country.
Similar to its previous industry-leading customer growth quarters, analysts remained concerned about the quality of customers T-Mobile USA could be adding to its network, noting similarities with Sprint PCS’ growth spurt in late 2001 and early 2002 due to its controversial Clear Pay offer. While T-Mobile USA offers a similar automatic spending limit program to Sprint PCS’ Clear Pay, T-Mobile USA repeatedly touted its more stringent credit and deposit policies and said that postpaid customers made up 87 percent of its current customer base.
Along with its strong customer growth, T-Mobile USA reported customer churn dropped from 4.4 percent during the first quarter of 2002 to 3.01 percent this year. The carrier added that its prepaid customer base increased by 23,000 customers during the first quarter, compared with a loss of 61,000 subscribers during the first quarter of 2002 due to the drop in customer churn.
The strong customer growth paid dividends for T-Mobile USA’s bottom line as the carrier reported total revenues jumped from $1.2 billion during the first quarter of 2002 to $1.8 billion this year, while its net losses dropped nearly $4 billion year-over-year to $216 million during the first quarter of 2003.
While T-Mobile USA continued to show off the strength of its nationwide offering, regional carrier Rural Cellular Corp. witnessed its customer growth dwindle from 16,212 net customer additions during the first quarter of 2002 to just 6,333 subscribers this year. The drop in customer growth came despite a slight drop in postpaid customer churn from 2 percent during the first quarter of 2002 to 1.9 percent this year.
Rural Cellular’s management added that it is continuing to evaluate network migration options for its TDMA network, but it is likely the carrier will deploy both CDMA and GSM technology, depending on the market. The network overlays are expected to begin later this year and be substantially completed by the end of 2005.
Rural Cellular noted its primary roaming partners are TDMA/GSM carriers AT&T Wireless Services Inc. and Cingular Wireless L.L.C. and CDMA carrier Verizon Wireless, and its eventual network migration plans could depend on reaching new agreements with those partners.
“We are actively negotiating with our roaming partners and expect to have some of those relationships clarified in this quarter,” said Ann Newhall, executive vice president and chief operating officer for Rural Cellular.
Highlighting its focus on fiscal management following its recent bankruptcy filing, Leap Wireless International Inc. reported improved financial results despite mixed operational results.
The carrier reported total revenue increased more than 30 percent year-over-year to $183.8 million during the first quarter of 2003. In addition, net losses per share fell more than 50 percent from $5.32 per share during the first quarter of 2002 to a loss of $2.28 per share this year.
“We expect that the improvements we achieved during the first fiscal quarter in the company’s revenue … will support the company’s financial restructuring,” added Harvey White, chairman and chief executive officer of Leap.
While Leap’s financial picture improved, a number of its operating metrics suffered. Leap reported net customer additions plunged from more than 268,000 subscribers during the first quarter of 2002 to approximately 1,000 customer additions this year, average revenue per user dropped from more than $37 last year to $35.12 this year and customer churn increased from 3.4 percent during the first quarter of 2002 to 4.1 percent this year.
A handful of Sprint PCS affiliates, including Alamosa Holdings Inc., AirGate PCS Inc., US Unwired Inc., Horizon PCS Inc. and diversified telecommunications provider Ntelos Inc., also posted quarterly results ahead of the May 15 deadline.
c Alamosa reported a 10-percent year-over-year increase in total revenues to $141.1 million during the first quarter of 2003 and a slight increase in net losses to $30.5 million, a loss of 33 cents per share. Despite a general decline in operating metrics compared with 2002 (except for churn), Alamosa’s stock price jumped more than 28 percent in early Friday trading to a 10-month high of $1.26 per share.
c AirGate reported a more than $10 million drop in total year-over-year revenues to $104.4 million during its second fiscal quarter along with a reported loss of 977 net customers during the quarter, which was due to a loss of more than 6,700 customers by the carrier’s iPCS Inc. subsidiary. AirGate’s management also said it is comfortable with network usage approaching 1,200 minutes of use per month per customer as the carrier moves toward the deployment of cdma2000 1x EV-DV technology in the future.
c US Unwired posted increases in both total revenues, which grew nearly 40 percent year-over-year to $128.7 million, and net losses, which more than doubled to $57.5 million. The carrier was able to nearly match its first quarter 2002 customer growth, adding 25,623 net customers during the first quarter of 2003, though unlike its fellow Sprint PCS affiliates, the carrier reported an increase in customer churn from 3.4 percent last year to 3.6 percent this year.
US Unwired also said it believes it will violate certain financial covenants this year that could hurt the carrier’s ability to borrow additional capital and that it “may approach Sprint PCS and seek to modify our management agreement … and our other agreements with Sprint PCS and take other actions consistent with such objectives.”
c Privately held Horizon PCS reported a 23-percent year-over-year increase in total revenues to $59.2 million during the first quarter of 2003 and an increase in net losses from $39.6 million last year to $42.3 million this year. The carrier also reported net customer additions dropped from 28,600 subscribers during the first quarter of 2002 to 24,000 subscribers this year, along with a decline in customer churn from 3.2 percent to 2.9 percent.
c Ntelos, which filed for bankruptcy protection in early March, posted a 31-percent year-over-year increase in wireless revenues to $46.8 million during the first quarter of 2003. The company also reported net customer additions increased from 4,476 subscribers during the first quarter of 2002 to 13,214 subscribers this year, which was helped by improvements in customer retention that resulted in a drop in customer churn from 5.09 percent last year to 3.45 percent this year.
