VoiceStream Fourth Quarter Below Expectations

(Telephony) VoiceStream Wireless reported a heavier loss in the fourth quarter as it works to integrate the businesses it acquired from Omnipoint and Aerial and missed several analysts' estimates on key metrics, including service revenue, subscriber additions and churn.

The carrier lost $809 million, or $3.49 per share, in the fourth quarter, compared with a loss of $152 million, or $1.58 per share, the previous year. Analysts expected a loss of $2.70 per share.

VoiceStream's results have been a moving target since management stopped giving Wall Street guidance since reporting its third-quarter results. VoiceStream, which ended the year with 3.9 million customers, added 558,000 customers in the fourth quarter, below the 700,000 range many analysts had predicted. Analysts also were looking for revenues in the $740 million range. VoiceStream reported revenues of $650 million. The company's churn reached 4.8%--2.9% for postpay customers and 10% for prepaid. VoiceStream's stock fell 4.56% on Thursday to close at $99.38 per share.

"We attribute the subscriber shortfall to an increasingly competitive environment, as well as higher-than-expected subscriber churn," said Peter Friedland, wireless services analyst with WR Hambrecht, in his recent report. "With six national wireless operators aggressively pursuing subscribers, it has clearly become more difficult for wireless operators to take more than their fair share of new subscriber growth, as demonstrated by VoiceStream's lower-than-expected incremental penetration rate."

VoiceStream Chairman and CEO John Stanton reiterated his confidence in the company's merger with Germany's Deutsche Telekom, even though DT's stock price has fallen to a two-year low. Under the terms of the deal agreed to in July, VoiceStream can demand a renegotiation if the value of DT stock average less than 33 euros for seven days within the 15 trading days prior to the close of the deal. DT closed at 28.65 euros on the German stock market Thursday.

"After we spent a number of months talking to a number of different parties, we concluded the DT transaction was the right transaction for our shareholders, and we continue to believe that to be the case," said Stanton. "The whole wireless equity sector has gotten beat up pretty bad since last summer. It does not change our view … Having gone through nine months of torture in the regulatory process, that process is a valuable asset since we're two-thirds of the way through it, and we would not want to restart that clock."