Cingular adds 1.1 million subs in Q2

Cingular grew its customer base another 2% in the second quarter, adding another 1.1 million subscribers, which boosted its commanding lead over No. 2 provider Verizon Wireless but failed to meet the impressive gains the operator achieved soon after acquiring AT&T Wireless last fall.

Cingular had 51.6 million subscribers at the end of June. Verizon Wireless had 45.5 million subscribers at the end of the first quarter, but the competing carrier has not yet reported its second-quarter results. In 2004’s last quarter, Cingular netted a mammoth 1.8 million new subs, but since then its momentum has petered out, announcing 1.4 million net adds in the first quarter and 1.1 million net adds for the second. Verizon Wireless meanwhile has managed to keep pace, adding 1.7 million subs in the fourth quarter and 1.64 million net adds in the first three months of the year.

Cingular, however, managed to set a record low churn number for the quarter at 1.8% for postpaid services and clocked an overall churn of 2.2%, which Cingular officials attributed to AT&T Wireless’ former prepaid customers moving to other carriers. Average revenue per user was up 1.7% to $50.43 over last quarter but down 5.6% from the combined pro forma results of AT&T Wireless and Cingular in Q2 of last year.

While ARPU fell, the combined companies’ revenues hopped up $4 billion off recent customer gains, rising from $8.2 billion in Q2 of 2004 to $8.6 billion last quarter. Cingular’s Q2 net profits, however, were more than halved due to a $170 million in acquisition and merger costs. Net income fell from Cingular and AT&T Wireless’s combined $339 million in last year’s 2nd quarter to $147 million this year. Without the acquisition charges, Cingular would have posted profits of $317 million last quarter, down 6.5%.

“These results show once again that our merger is working,” CEO Stan Sigman said in a statement. “We are making progress and growing the business, though we of course have a long way to go before our work is done. The complex tasks of integrating networks, systems, processes and people continue to go well and are on or ahead of schedule.”

Cingular has moved 4 million former AT&T Wireless customers to new Cingular plans, and the company has managed to keep many of AT&T’s postpaid customers in the network by grandfathering in their former plans and phones. Transitioning a customer, however, isn’t as easy as just switching between AT&T and Cingular’s differing rate plans. Cingular is doing away with many of AT&T’s former handsets, and many of Cingular’s handsets lock SIM cards into their phones, meaning customers can’t merely switch out SIMs.

A bright spot on the financial statement was Cingular’s 12% increase in data ARPU from $3.70 to $4.16 off increased SMS, instant messaging, e-mail, and multimedia and gaming services. That means more than half of Cingular’s quarter-over-quarter ARPU increase came from data services. Cingular said it was still on track to launch its UMTS/high speed downlink packet access (HSDPA) networks in 15 to 20 markets by the end of 2005.