Cingular Churns Out Profit in Q1
Cingular, the largest wireless carrier in the United States, reported net income of $354 million for the three months ending March 31, compared with a loss of $240 million in the same period a year ago.
Revenue was $8.98 billion, up from $8.23 billion in the year ago quarter.
Operating expenses in the first quarter totaled $8.17 billion.
The company had 55.8 million subscribers as of March 31, and 1.7 net customer additions for the quarter. Monthly customer churn was 1.9 percent, meaning the carrier lost 1.9 percent of its customers during the month. That's down from a churn of 2.2 percent a year ago.
"Churn is at a record low," said Pete Ritcher, chief financial officer at Cingular, during a conference call with investors and analysts.
But average monthly revenue per user (ARPU) was down, too, to $48.48, compared with $49.60 a year ago. Officials blamed this on an increase in wholesale customers, who don't pay as much as retail customers.
"The primary driver our ARPU decline was the growth of our reseller base," Ritcher said.
On the other hand, monthly ARPU just from data services was $5.22, up some 41 percent in the first quarter last year. Data transfers accounted for 10.9 percent of monthly revenue, as opposed to 7.7 percent for the same period last year. Customers sent 6.75 billion text messages in the first quarter, a big chunk of which were related to the nation's obsession with the fifth season of American Idol. (During the quarter, Cingular launched "Live Idol Ringtones," in which customers can download live performances to their cell phones, causing their phones to sing poorly in lieu of ringing.)
Last year, customers sent 41.5 million text messages to vote for their favorite Idols, and Cingular officials expect to top that this year.
"Text messages from American Idol are up 55 percent over the last season," said Ralph de la Vega, Cingular's chief operating officer, during the conference call.
Cingular is on track to upgrade all its major markets to 3G HSDPA (high-speed downlink packet access) network by the end of the year, de la Vega says. In December, Cingular Wireless launched its highest-speed data network service in 16 major U.S. cities. Based on HSDPA (high speed download packet access), the BroadbandConnect service provides average throughput rates of 400 Kbit/s to 700 Kbit/s.
BroadbandConnect supports voice and data simultaneously, and the speeds are on par with Sprint Corp. (NYSE: S) and with the Verizon Wireless EVDO (eVolution data optimized) networks. Cingular's Business Markets Group reported today that Lenovo Group will launch HSDPA-based ThinkPad notebook computer later in the year.
Cingular also plans to launch multiple handsets in the next quarter that support both cellular and WiFi connections, officials say.
But in the meantime, the company is dealing with the headache of merging its legacy networks with the GSM networks of AT&T Wireless, which Cingular bought in 2004. (See Cingular Buys AT&T Wireless.)
"We have a lot of work ahead of us," de la Vega said.
The company has integrated networks in 38 of its 63 markets, according to Cingular spokesman Ritch Blasi. Billing systems still need to catch up. The goal is to have a single billing system in each market, de la Vegas said.
"Cingular will turn down its TDMA (time division multiple access) network and analog in 2008," says Philip Redman, a research VP at Gartner. "It still has to integrate 60 percent of the AT&T networks and convert all the backend systems -- billing and customer service -- to one system. Cingular is taking on one of the biggest network integration programs ever and while last year, and most of this year has been challenging, 2007 will be when it can finally move forward with a single system."
— Carmen Nobel, Senior Editor, Light Reading