Cingular sees slackened subscriber growth

Despite strong profits and sales, Cingular added only 867,000 net customers in the third quarter, signaling a significant loss of momentum the company gained after acquiring AT&T Wireless last year. The carrier also posted gains in data revenues as it prepares for the launch of 3G services.

In the previous three quarters, Cingular added 1.8 million, 1.4 million and 1.1 million new customers respectively after. The carrier still had 52.3 million subscribers at the end of September. Its closest rival Verizon Wireless recorded 47.4 million customers for the second quarter, but while Cingular’s growth rate is losing steam, Verizon’s appears to be gaining momentum. Verizon Wireless had added an average of 1.74 million customers over the last four quarters, and it posted an industry record 1.9 million net ads for the three months ending in June.

Cingular’s profits, however, soared. It recorded a 56% increase in earnings, from $142 million in Q3 2004 to $222 million this last quarter. Revenues came in at $8.7 billion, up 6.2% over combined Cingular and AT&T Wireless revenues last year, when both companies were operating separately.

Cingular lost last quarter’s gain in average revenue per user (ARPU), which fell 1.5% from the second quarter to $49.65 per month. The combined Cingular’s monthly ARPU also continued to track about 5% lower than the pro forma ARPU of Cingular and AT&T Wireless last year. Cingular officials said that ARPU is continuously being effected by the transition of its customers to lower-priced GSM plans (the company has transitioned 93% of its traffic to its GSM networks) and the popularity of its family plans and Rollover features, which cut into per-minute overage revenues. ARPU also would have been 20 cents higher if customer credits related to hurricanes Katrina and Rita were factored in.

Those ARPU declines, however, were offset by increased data revenues. Data ARPU increased 4.1% to $4.33 quarter-over-quarter. In the previous two quarters, Cingular’s data ARPU jumped 17% in six months, driven largely by text messaging and ringtones. Cingular reported transporting 5.2 billion SMS messages and 60 million MMS messages last quarter. Though data accounts for less than 10% of Cingular’s overall revenues, Cingular and many other carriers look at it to be a key growth area as voice revenues continue to decline.

Cingular is in the process of deploying UMTS networks in major markets across the country, supplemented by high-speed downlink packet access (HSDPA) technology. The HSDPA upgrade will provide access speeds of 400 kb/s to 700 kb/s, making it the fastest cellular network in the U.S. On Tuesday, Cingular turned on HSDPA in three of existing UMTS markets, launched last year by AT&T Wireless, but the carrier doesn’t yet have HSDPA handsets or PC cards to take advantage of the added capacity.