Cingular's Subs-stantial Quarter

Cingular Wireless reported profits up 282 percent for the third quarter as it added another 1.4 million subscribers to its books.

The top cellular carrier in the U.S. reported this morning that net income grew to $847 million from $222 million in the same quarter a year ago. Cingular's total revenues were $9.6 billion, up 9.2 percent over revenue for the year-ago quarter and 3.6 percent compared to the second quarter of 2006.

"The increasing pace of incremental revenue growth is a clear indication that Cingular is gaining momentum in the marketplace," wrote Technology Business Research Inc. (TBR) analyst John Byrne in a note to clients. "The company’s continued focus on the postpaid [customers who pay a monthly bill] market is the major factor driving this trend."

The Atlanta, Ga.-based joint venture between AT&T Inc. (NYSE: T) and BellSouth Corp. (NYSE: BLS) ended the quarter with 58.7 million subscribers, a year-over-year increase of 6.4 million. Verizon Wireless had around 54 million subscribers at the close of the second quarter. Sprint Corp. (NYSE: S) reported 51 million in the same time period. T-Mobile US Inc. trails the big three with 23.3 million.

"Sprint Nextel and T-Mobile USA are likely to have difficulty keeping pace with Verizon and Cingular as overall industry growth slows," reckons Byrne.

Cingular's average revenue per user (ARPU) increased to $49.76 for the quarter, compared to $48.84 in the second quarter of 2006. "Cingular’s customers still post lower ARPU than most competitors but the company has reversed the downward trend," says Byrne. "Voice ARPU continues to decline but is being more than offset by strong growth in data ARPU."

Cingular’s data ARPU of $6.32 was up 46 percent compared to the third quarter in 2005. This growth was due to the increasing popularity of downloadable games, ringtones, mobile instant messaging, mobile email, photo messaging, and media bundles, according to Cingular.

Like other U.S. carriers, Cingular has -- finally -- started to see significant revenue from data services. That means Cingular’s ARPU should continue to grow in the next year, driven by higher data use. (See Sprint & Verizon Push 3G.)

Part of this growth could be driven by Cingular's move to 3G networks. The firm says its continued deployment of UMTS/HSDPA technology is "on track" and it has completed the integration of its network with AT&T Wireless's GSM sites, which was started soon after the companies merged in October 2004. (See Cingular Launches HSDPA.)

— Dan Jones, Site Editor, Unstrung

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