RealTime IT News

Tougher Times for Cellular Carriers?

Wireless cellular carriers on Tuesday reported mixed results amid indications that the industry is starting to mature and growth is slowing.

While Verizon Wireless reported customer well short of expectations, VoiceStream Wireless (soon to be renamed "T-Mobile" by its parent company Deutsche Telekom ) and AT&T Wireless said they added about half a million subscribers, respectively.

The competition for subscribers comes at a time when some analysts predict that cellular markets have reached a saturation point, with a total of more than 130 million subscibers or 44 percent of the population. And that has all the wireless carriers scrambling to find new customers, often encroaching on each other's subscriber base.

"Every traveling professional and twenty-something has a phone. Thus, carriers have begun to look for alternative subscriber bases to continue adding new customers," according to a new report from the Yankee Group.

Verizon, the largest carrier in the U.S., reported this morning that it added only 186,000 customers in the first quarter. J.P. Morgan had expected Verizon Wireless to add 300,000 subscribers compared with 518,000 in the year-ago period.

But in contrast, VoiceStream acquired almost half a million new customers in the first three months and for the first time, contributed to the parent's cash flow. And Deutsche Telekom's net revenue in the current year is expected to be considerably higher than in 2001. The parent expects an increase of around 10 percent.

And AT&T Wireless Group showed its ability to deal with a soft economy and intense price pressures in the mobile phone market, delivering a slight net loss but showed solid Q1 subscriber growth.

For the first three months of the year, the No. 3 wireless carrier reported a net loss of $176 million, or 7 cents a share, an increase from a 1 cent per share loss in last year's first quarter. The company returned a loss of 1 cent per share from continuing operations, easily beating the 3 cents per share loss expected by analysts polled by Thomson Financial/First Call.

Revenue for the quarter was $3.6 billion, a 12.5 percent increase from year ago. Service revenue increased 14.5 percent from first quarter 2001.

Thanks to its aggressive mLife advertising campaign and a willingness to extend holiday discount plans, the company added 650,000 customers in the quarter, bringing its customer base to 19.5 million, which includes customers added through its purchase of TeleCorp. Deutsche Bank forecast the company would add 525,000 new customers.

AT&T Wireless Group said it aggressively moved to retain customers by offering them better-priced monthly plans and upgraded equipment. The moves brought AT&T Wireless Group's churn rate down to 2.6 percent, a 10 percent improvement from the previous quarter.

But adding the customers and retaining existing ones came at a price, as AT&T Wireless Group saw its average revenue per user fall to $58.60, a 5.8 percent decrease from last year's first quarter.

AT&T Wireless Group said it plans to continue adding customers, growing its net subscriber base by 550,000 in the second quarter.