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But Is Everybody Growing?

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor
1/30/2006

Cingular Wireless and Verizon Communications Inc. (NYSE: VZ) may have wowed Wall Street with robust growth this past quarter, but analysts say Sprint Corp. (NYSE: S)'s upcoming results will be a better barometer of the American cellular industry's health. The Feb. 22 announcement will also mark the first combined quarterly report from Sprint Nextel since the entities merged their sizable blue- and white-collar customer bases last year. ”They’re the 800-pound gorilla,” says Roger Entner, VP of wireless telecom for Ovum Ltd. . “It’d be like predicting computer sales without Dell.”

“Sprint seems to have the most momentum and has consolidated a number of enterprise offerings into a single package… including the Nextel assets,” notes Jack Gold, principal at J.Gold Associates.

But all the major operators that have already filed quarterly reports saw a strong boost in the fourth quarter.

Cingular, the largest mobile phone operator in the U.S., saw strong subscriber and revenue gains during the fourth quarter of 2005. It reported a profit of $204 million compared to a loss of $495 million last year. The firm is a joint venture between AT&T Inc. (NYSE: T) (formerly SBC) and BellSouth Corp. (NYSE: BLS).

The battle is on between Cingular and Verizon to be the largest wireless operator in the U.S. Cingular remains in the lead at present, but Verizon is closing fast, adding 2 million customers in the fourth quarter of 2005. Cingular ended the year with 54.1 million customers and Verizon Wireless had 51.3 million.

Verizon Wireless’s revenues were $8.7 billion in the quarter, an 18.3 percent increase compared with $7.3 billion in the fourth quarter of 2004. The company says the increase is due to more demand for data services. Verizon Wireless's data services revenue for the year totaled $2.2 billion, double its 2004 figure. Verizon says that around 3.5 million people now have devices that can be used to access its 3G network. These users are likely to be among the enterprise early adopters, using handheld devices like Treos for email and mobile application access.

”Verizon still has the largest installed base of enterprise users, but haven’t done a great job with their enterprise offerings, which are still a conglomeration, rather than a packaged solution,” comments analyst Gold. The carrier, he notes, could do more integration work, like developing common email accounts across its Treo smartphones and laptops using its EV-DO Aircard.

The smallest of the major U.S. operators, Deutsche Telekom AG (NYSE: DT) subsidiary T-Mobile, will not issue a full earnings statement until March 2, but the operator did say that it has experienced strong customer growth during the quarter, adding a net 1.4 million customers, which takes its total to 21.7 million at the end of 2005.

“T-Mobile has some potential, but their biggest stumbling block is their poor coverage in many areas,” says Gold, although he notes that the operator has excellent worldwide roaming agreements, especially in Europe.

— Dan Jones, Site Editor, Unstrung

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