AT&T Wireless Posts Q3

REDMOND, Wash. -- AT&T Wireless (NYSE: AWE) today reported a strong third quarter with services revenue for the mobility business increasing 16 percent to $3.765 billion compared to $3.239 billion for the year-ago quarter.Earnings/(loss) per share (EPS), excluding non-cash impairment charges, was $0.04 for the third quarter. These non-cash charges include wireless licensing costs impairments, charges related to the company’s investments in unconsolidated subsidiaries and a valuation reserve on deferred taxes. The company’s reported loss per share was ($0.76) in the third quarter, including a net impact of ($0.80) from these non-cash charges. In the year-ago quarter, the company had EPS of $0.03 per share.In accordance with accounting principles (SFAS 142) the company no longer amortizes goodwill and other intangible assets, which are primarily wireless licenses, with indefinite useful lives. The company will now evaluate these assets for impairment annually in the third quarter using a fair value approach. As a result, the company recorded a pre-tax impairment of licensing costs of $1.3 billion. Additionally, the company recorded a pre-tax charge of $1.0 billion related to its unconsolidated subsidiaries. The charge includes $631 million based on the company’s assessment of the value of its unconsolidated subsidiaries and $369 million representing the company’s proportionate share of the SFAS 142 charges recorded by its unconsolidated subsidiaries. Finally, in line with SFAS 109, the company recorded $740 million as a valuation reserve against its deferred tax assets.Third quarter mobility EBITDA (defined as operating income excluding depreciation and amortization), excluding the pre-tax impairment of licensing costs:

“AT&T Wireless again delivered solid quarterly financial results by almost every operational measure,” said AT&T Wireless Chairman and CEO John D. Zeglis. “Faced with the challenges of WorldCom’s bankruptcy and a tough economy, we reported strong services revenue growth coupled with the company’s best ever EBITDA of $1.075 billion, excluding the non-cash impairment charges. We continue to do an excellent job of retaining our customers although churn was up due to the impact of WorldCom’s exit from the wireless business.Services revenue for the mobility business increased 16.2 percent to $3.765 billion compared to $3.239 billion for the year-ago quarter. The increase includes revenue associated with TeleCorp subsequent to its acquisition on February 15, 2002 and represents the company’s eighteenth consecutive quarter of services revenue growth. Services revenue was also impacted positively by growth in the consolidated net subscriber base while being offset by a year-over-year decline in average revenue per user (ARPU). Equipment revenue was $298 million in the third quarter, an increase of 15.9 percent compared with the prior year’s quarter of $257 million. The growth is primarily due to a rise in handset volume, higher average unit prices and an increase in accessory sales.Total revenue for the third quarter rose to $4.063 billion, an increase of 16.2 percent compared to the year-ago quarter.Minutes of use per subscriber climbed to a record level of 484 average minutes per subscriber per month in the third quarter, an increase from 389 minutes in the year-ago quarter.ARPU was $61.60 in the third quarter, a 2.0 percent increase from the $60.40 reported for the second quarter. For the second consecutive quarter this year, ARPU increased sequentially. The company said the increase in ARPU was primarily the result of seasonally higher roaming revenue as well as fewer lower-ARPU reseller subscribers in the subscriber base, pricing actions, increased data revenues from SMS and the introduction of new revenue sources such as international roaming. Compared to the year-ago quarter, ARPU decreased 3.1 percent primarily due to continuing competitive pricing but also reflecting the company’s success in moving customers to more optimal calling plans based on their needs.Churn for the third quarter was 2.9 percent, a 20-basis point reduction from the year-ago quarter and a 50-basis point increase from the second quarter of 2002. The decrease from the year-ago quarter resulted from the movement of customers onto calling plans that better fit their needs as well as an increased number of customers extending service contracts. The increase from the second quarter is the result of the continuing impact of the WorldCom customer migration. Deactivations of WorldCom customers negatively impacted our third quarter churn by 40 basis points. Churn relating to post-paid programs was the same as the prior-year quarter at 2.6 percent.Consolidated subscriber net additions for the mobility business totaled 201,000. Total consolidated subscribers were 20.154 million at the end of the third quarter, representing a 17.7 percent increase from the prior year quarter, including the subscribers associated with the acquisition of TeleCorp. Total subscribers including affiliates were 22.1 million, a 12.2 percent increase from the 19.7 million recorded at the end of the third quarter last year.Capital expenditures for the quarter, excluding internal use software, were $1.210 billion. The sequential increase from the second quarter was primarily due to the launch of several key markets of AT&T Wireless’ new advanced GSM/GPRS network, which was built out in 100 percent of the company’s pre-TeleCorp footprint months ahead of schedule. AT&T Wireless now has the largest GSM/GPRS network in North America. Recent cities launched include New York City, Los Angeles, San Francisco, Philadelphia and Boston.The company said it’s now installing GSM/GPRS equipment in 12 of the 15 TeleCorp markets in the fourth quarter so they can be launched in 2003.AT&T Wireless Services Inc.