Feb 1, 2002 12:00 PM,

Fourth-quarter subscriber numbers disappoint investors

Lynnette Luna With additional reporting by Kelly Carroll in Chicago

Lower subscriber additions in the fourth quarter among the nation's largest wireless carriers has created alarm for investors who fear the growth of wireless services is slowing.

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Sprint PCS, Verizon Wireless and Cingular Wireless all reported subscriber additions below analysts' expectations (see chart). And regional stalwarts such as United States Cellular and AirGate PCS faltered on new subscriber adds. AirGate's stock fell almost 25% after revealing it expected to add just 38,000 to 45,000 new subscribers in the second fiscal quarter. US Cellular added 82,000 customers, less than half the 171,000 customers analysts had forecasted.

AT&T Wireless and VoiceStream Wireless were two bright spots in the fourth quarter. Both added subscribers within Wall Street's range. While AT&T Wireless announced it added 927,000 customers on Jan. 29, the company's stock price decreased 10 cents to $11.65.

“We are concerned about stock prices — our stock price, in particular — and the market's unwillingness to accept our consistent growth track record or the growth that lies ahead of us,” John Zeglis, chairman and chief executive officer of AT&T Wireless, told analysts. “We wait confidently, and somewhat impatiently, for the day the stock market appreciates [our] full value.”

Q4 subscriber additions for major U.S. carriers
	Expected	Actual
AT&T Wireless	900,000	927,000
Cingular Wireless	700,000	325,000
Sprint PCS	1.3 million	1.1 million
Verizon Wireless	900,000	715,000
VoiceStream Wireless	550,000	668,0000

Investors' fixation on quarterly subscriber gains has been frustrating to many wireless executives trying to clean their companies' balance sheets by eliminating low-profit customers. They argue that slower growth means higher margins.

Yet investors were hoping the U.S. wireless market within the next six years would reach the same 70% penetration levels found in developed European countries, said Tim O'Neil, vice president of Wit SoundView. Penetration in the U.S. lingers around 45%.

“It is not nearly as easy to hit subscriber numbers now, because all of the low-hanging fruit is gone,” said Craig Mallitz, vice president of wireless services for Legg Mason.

Analysts predict a bumpy ride for the industry until carriers can differentiate their products based on something other than pricing, such as the high-speed wireless data services they plan to roll out during the next 18 months.