Cingular profits from growing subscriber base

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Strong subscriber growth, improved customer loyalty and higher wireless data usage helped Cingular Wireless report better-than-expected first-quarter results on Wednesday.

Cingular, a joint venture between AT&T and BellSouth, reported first-quarter profits of $354m, compared with a loss of $240m in the year-ago period when results reflected costs associated with the purchase of AT&T Wireless.

Revenues increased 9.1 per cent to $8.98bn.

“Cingular got out of the gate fast in the first quarter of 2006,” Stan Sigman, chief executive, said.

Cingular’s profit and growth potential was one of the main drivers behind AT&T’s $68bn acquisition of BellSouth unveiled last month.

The company added a net 1.7m customers in the latest quarter, consolidating its position as the largest US mobile phone carrier with 55.8m subscribers at the end of March, up more than 8m since the Atlanta-based carrier acquired AT&T Wireless in 2004.

Retail customers added more than 1m to the net additions, boosted by the success of Cingular’s popular GoPhone pre-paid service.

The strong subscriber growth was underpinned by improved network quality and coverage, reflecting the successful integration of the Cingular and AT&T Wireless networks and continuing network upgrades.

Capital expenditure was $1.44bn during the quarter.

This in turn helped Cingular reduce monthly customer turnover, or churn, to just 1.9 per cent, down from 2.2 per cent in the fourth quarter.

Average revenue per user – another key industry measure – fell from $49.59 per consumer to $48.48 in the previous quarter, mainly because of the growth of lower-priced wholesale plans, but the decline was offset somewhat by strong data revenue growth.

Cingular’s average revenue per user for data increased 41 per cent to $5.22 a month driven by the growing popularity of mobile game downloads, ringtones and messaging.

Peter Ritcher, chief financial officer, said Cingular would spend $7bn-$7.7bn this year on network upgrades including the roll-out of wireless technology.

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