Alltel hit by hurricane costs, maps ’06 growth

Alltel said today that its fourth quarter and full year 2005 revenue jumped. However, the company was hurt by costs associated with several hurricanes as well as restructuring.

For the quarter, the company posted total revenues of $2.6 billion, which represents a 21% increase from the fourth quarter of 2004. Total revenues for 2005 were $9.5 billion, a 15% increase from 2004. Net income for the quarter was $255 million, or 66 cents per share. While missing analysts’ estimates, net income also was impacted by $39.8 million in various charges, including more than $9 million directly attributable to Hurricane Katrina. Excluding one-time charges for hurricane and integration costs, the company's adjusted profit was 77 cents a share.

The report was the first quarterly set of numbers since the company announced an agreement with Valor Communications to spin off and merge the two companies’ wireline operations. Alltel for its part already has started the separation process from an internal perspective. While that will add some expense in the short-term, it will give the as yet unnamed wireline group a running start when it does begin operating on its own, said Jeff Gardner, who will become president and CEO of the group.

Going into 2006, the all-wireless Alltel expects to grow through both additional network investment as well as other strategic options, Scott Ford, president and CEO of the company, told analysts in a call this morning. Among those options are upcoming spectrum auctions. While the company will participate in them, Ford declined to elaborate on any particular strategy.

“At this point it’s a fluid situation, and it’s not clear enough yet to speculate,” he said.

The company, however, did confirm that it will launch a new pre-paid wireless product in 2006 as it completes its move to a new back-office system that makes pre-paid significantly cheaper. The push toward more pre-paid customers coincides with the success Alltel has seen with its Simple Freedom plan sold through Wal-Mart stores.

“The average acquisition cost of Simple Freedom customer is well below our average because Wal-Mart does all the merchandising,” said Kevin Bebee, president of operations for Alltel. “We really just stock the shelves and provide the service.”