VoiceStream on the upstream

Third quarter results reflect a carrier's mission to be nationwide player While its merger with Deutsche Telekom is pending, VoiceStream Wireless reported more than 500,000 new subscribers and a higher-than-expected operating loss during the third quarter. The carrier attributed the loss to one-time expenses and expansion costs inherent in its effort to become a nationwide player.

During the quarter, VoiceStream reached an agreement with DT, which invested $5 billion in the U.S. carrier's network expansion. The carrier also expanded its footprint to about 260 million pops, helped by the Power-tel acquisition and a recent agreement with Cingular Wireless to swap spectrum, which gives it coverage in California and Nevada.

Although some actions during the quarter were costly, the carrier remains confident. "These one-time costs have put us on the road to success," said John Stanton, chairman and CEO of VoiceStream Wireless. "Our first strategic objective is to create a national footprint. We call this our manifest destiny."

In addition to an operating loss, the carrier experienced lower-than-expected ARPU and net service revenue. This was blamed on the fact that revenue from some new subscribers was not included in the third quarter.

Despite some earnings surprises, the carrier maintains a positive standing within the financial community, with some firms upgrading it last week. The DT merger keeps VoiceStream on the radar of many in the financial community.

"The merger is all upstream for Voice-Stream," said Rudy Baca, global telecom strategist for The Precursor Group."Even if it didn't go through, they still get the money."

Although DT stock has approached the level that would allow VoiceStream to nix the deal, Baca doesn't believe the carrier will do so.

"When a carrier can have a huge global partner like DT, it always needs something like that," Baca said.