Cingular adds 1.4M subs, profits soar

If there were any lingering questions about Cingular’s recovery since its acquisition of AT&T Wireless two years ago, they were dispelled today. Cingular posted record profits and posted subscriber gains of 1.36 million in the third quarter.

Cingular recorded $9.6 billion in Q3 revenues, up 9.2% from the year before, and its highest-ever quarterly profit of $847 million, 280% higher than its net earnings in last year’s third quarter. Its monthly average revenue per user (ARPU) increased 90 cents to $49.76 year over year, and even bumped up 11 cents from the second quarter.

Though Cingular was far off from its record quarter of 1.82 million net addition established in the first quarter, its 1.36 million net subs were higher than analysts estimated. A Reuters poll of nine analysts predicted Cingular would add only 1.26 million subscribers last quarter.

Cingular managed to hit its financial numbers despite capex drains on its bank accounts. It spent $1.8 billion in the third quarter, finishing its integration of the AT&T Wireless (“blue”) and Cingular (“orange”) networks and continuing its UMTS/High Speed Downlink Packet Access rollout. Cingular now has 3G service in 52 metro markets in 28 states, covering 115 cites with a population of 1000 or more. Cingular also launched its first 3G handset that incorporates HSDPA technology: the LG Electronics CU500.

Those buildouts and its GSM/EDGE networks help boost monthly data ARPU to $6.32, up 46% from last year’s 3rd quarter and up 10% sequentially. Messaging drove much of that, however, as Cingular now as 28 million active data users, most of whom are using either simple text messages, email or newer MMS services.

Cingular’s churn, however, increased slightly from the second to the third quarters, rising from 1.7% to 1.8%, but it was much lower than the same last year Q3 churn of 2.3%. Cingular continued to focus more on it own direct retail sales, recording only 174,000 wholesale adds, compared 380,000 the previous quarter, but the launch of its new Go Phone prepaid service tilted much of new growth in the 3rd quarter away from the postpaid side. It added 256,000 prepaid subscribers last quarter, compared to only 77,000 in the previous quarter. Cingular’s decision to penalize its legacy TDMA users with a $5 monthly charge also had a significant effect on its user base. Between the June and October, Cingular lost 1.1 million of its 4.7 million TDMA subscribers, who either bought GSM phones or left the carrier.