Cingular profits quadruple on subscriber growth

Listen to this article

00:00
00:00

Stronger than expected subscriber growth and reduced subscriber “churn” helped Cingular Wireless, the biggest US mobile carrier, nearly quadruple profits in the third quarter.

Cingular, the first of the big four US mobile carriers to report its quarterly results, added 1.4m net new subscriber during the quarter, up from 867,000 in the same period last year, and ended the quarter with 58.7m subscribers, a gain of 6.4m in the last 12 months.

The subscriber gain beat most analysts expectations by more than 100,000 suggesting that Cingular is continuing to take market share from both Sprint Nextel and Deutsche Telekom’s T-Mobile USA unit.

Meanwhile subscriber “churn,” a key measure of customer loyalty fell to 1.8 per cent, down from 2.3 per cent a year earlier. “Our work is not yet done in bringing even better results, services, and capabilities to our customers,” said Stan Sigman, chief executive.

The strong subscriber group coupled with falling integration costs following the $41bn acquisition of AT&T Wireless by Cingular, enabled the carrier to boost third-quarter profit to $847m from $222m a year earlier on operating revenues that increased to $9.55bn from $8.7bn.

Cingular, a joint venture between AT&T and BellSouth, said networks integration costs fell to $453m from $637m in the previous quarter underscoring progress made following the merger.

Average monthly revenue per user was $49.76, up from $48.84, in the second quarter and $49.65 a year earlier, boosted in part by growing data usage as Cingular rolls out its 3G network. In the latest quarter average monthly revenue from wireless data services was $6.32, or 13 percent of the total monthly Arpu.

Cingular, which has set its sights on matching the best profit margins in the industry by the end of next year, said its normalised margin for operating income before depreciation and amortisation was 35.6 per cent, up 4 percentage points from a year earlier and up 3 percentage points from the second quarter.

Pete Ritcher, Cingular’s chief financial officer, said he expects its profit margin to approach 40 percent by the end of 2007 – in line with Verizon Wireless, the joint venture of Verizon Communications and Britain’s Vodafone.

The Cingular name is expected to be phased out once AT&T’s $79.3bn acquisition of Atlanta-based BellSouth, is completed although Mr Ritcher emphasised that there would be no branding changes during the critically important fourth quarter period when Cingular is hoping to sign up increased numbers of 3G subscribers.

The AT&T-BellSouth deal was approved by the Justice Department earlier this month but is still awaiting clearance by the Federal Communications Commission after two Democrat members asked for more time to study last-minute concessions offered by the companies.

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.