Increased competitive pressure by larger operators appear to have had a significant impact on smaller operators as regional player Ntelos reported a slowdown in customer growth and sagging profits.
The carrier, which offers service in parts of Virginia, West Virginia, Maryland, Ohio, Kentucky and N.C., said it added 3,400 net customers during the first quarter of this year, down from the 11,400 customers the carrier added during the first three months of 2013. The downturn came from both prepaid and postpaid operations, with prepaid growth dropping from 8,100 net customer additions last year to just 3,100 net customer additions this year, while postpaid growth fell from 3,300 net customer additions last year to just 300 net customer additions this year. Impacting growth was a dip in postpaid gross additions and an increase in postpaid churn.
Overall churn increased from 2.8% last year to 3% this year, though churn dropped sequentially from the 3.1% recorded during the fourth quarter of last year.
Ntelos CEO James Hyde cited the continued competitive environment during the first quarter as “challenging” for the carrier, but noted that its recently launched NControl shared data plans helped the carrier maintain customer growth, with plans to introduce additional features, including a device upgrade program set to launch this month.
“It’s not small news when big guys switch their marketing efforts from coverage and devices to price,” Hyde explained in an interview with RCR Wireless News earlier this year. “Its’ increasingly challenging when they get more aggressive on price. We need to stay targeted on our markets. We know we can’t always be the leader in price. When everyone starts advertising on price, it increases churn. … There are opportunities for smaller players to grab share if we execute well.”
Revenues increased 2% year-over-year to $122.1 million during the first quarter, boosted by a larger customer base and increased spending per line of service. Average revenue per line of service increased from $62.23 during the first quarter of last year to $62.49 this year.
Revenues from Ntelos’ network partnership with Sprint dropped from $40.2 million last year to $39.3 million this year. The two companies announced last September a resolution to a long-standing billing dispute. Ntelos noted the settlement resolved the issue, “including the data rate reset dispute that began in the fourth quarter of 2011 and the unrelated historical billing disputes that were raised in the third quarter 2012.” Ntelos touched on that latter issue in 2012, explaining it involved outstanding billing issues in the range of $8 million. Ntelos struck a network alliance deal with Sprint in 2007 covering CDMA services that is set to run through 2015, reporting that the agreement provides a minimum of $9 million per month in revenues. Negotiations on extending that agreement remain ongoing.
However, operating expenses surged more than 8%, sending operating income down more than 32% to $11.9 million for the quarter. Combined with increased expenses tied to interest, net income tumbled from $5.5 million last year to just $1.3 million this year. Adjusted earnings before interest, taxes, depreciation and amortization also took a hit, dropping from $37.4 million last year to $33.9 million this year.
Ntelos added that it has launched LTE services in four markets, with additional markets to come online throughout the year. The carrier had initially planned to cover 70% of its potential customers with LTE services by the end of 2014.
Ntelos’ LTE plans initially tap into the carrier’s 1.9 GHz spectrum that also supports its CDMA-based offerings, but the carrier also has approximately 20 megahertz of 1.7/2.1 GHz spectrum that could eventually be used to support services. Hyde noted that the carrier had attempted to pick up additional 1.9 GHz spectrum assets during the recently completed H-Block spectrum auction, but that Dish Network’s aggressive participation in eventually winning all of the licenses up for bid made those efforts difficult.
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