Cingular Wireless profits nearly quadruple

Profits at Cingular Wireless, the largest US wireless carrier, almost quadrupled in the fourth quarter, buoyed by particularly strong wholesale revenues and pre-paid subscriber growth.

The figures, the last reported by Cingular as a joint venture following the now-completed $86bn merger of its corporate parents, AT&T and BellSouth, indicate that the US wireless telecommunications sector ended a strong year on an continued upswing.

They also suggest that Cingular continued to take market share away from Sprint Nextel, the third largest network operator which has stumbled following Sprint’s acquisition of Nextel Communications.

“Our last quarter as a joint venture operating under the Cingular name was our best ever on a variety of fronts,” said Stan Sigman, chief executive.

Cingular said fourth-quarter profit rose to $782m from $204m a year earlier on revenues that increased by 10.2 per cent to $9.8bn.

Underscoring the successful integration of former AT&T Wireless and Cingular brands, the company added 2.36m new customers in the quarter, beating analysts expectations and ended the year with 61m subscribers, comfortably ahead of Verizon Wireless, the second largest US mobile network operator.

The fourth quarter is traditionally a strong period for prepaid mobile phone sales in the US but industry analysts said both retail prepaid net subscriber additions of 746,000 and wholesale gains were ahead of expectations.

“We see prepaid and wholesale as very profitable businesses and hence, we do not see the mix shift as margin dilutive,” said Jason Armstrong of Goldman Sachs in a note to investors.

Average revenues per user grew by nearly one per cent in the fourth quarter driven by continued strong growth in data revenues which increased by 53 percent to $7.19 out of a total of $49.76. Churn, or the rate at which Cingular loses customers, fell to 1.8 per cent from 2.1 per cent in the year earlier period.

Cingular said data revenue growth was spurred by the increasing popularity of downloadable games, ringtones, mobile instant messaging, mobile email, photo messaging, and media bundles. In addition, text messaging continued to grow. In the fourth quarter of 2006, the company had more than 32m active data customers, and delivered nearly 180m multi-media messages and more than 12bn text messages.

Overall, Cingular reported normalised operating income margins of 34.4 per cent, an improvement of 340 basis points compared to a year ago but a sequential decline of 120 points reflecting seasonally lower roaming revenues and higher marketing and advertising costs, as well as increased customer acquisition costs.