1-Rates, Prepaid Help Earnings Soar

Carriers reported record first- quarter earnings in 1999. Steadily increasing wireless subscriber numbers coupled with the evolution in service offerings of 1-rate, prepaid and post-paid service plans largely are accountable for the high-profit gains.

This year's first quarter subscriber increases are part of the growth trend in minutes of use (MoU) coupled with the flattening decline of average revenue per user (ARPU).

"We've gone from double-digit down to single-digit decline in ARPU," said Jonathan Marshall, AirTouch spokesperson. "Even when our ARPU was falling in double digits, typically our selling costs were falling even faster."

AirTouch increased its first-quarter wireless subscriber base in the United States by 20%, attributing the increase to the value of its bundled-minute plans, clear digital service and customer care, which drove average MoU up more than 15% over last year's first-quarter results.

"Because of the success of digital plans in large buckets of minutes, we're seeing that MoU has finally started going up," Marshall said. "The reason MoU was falling before last year wasn't because any individual customer was talking less, but because of the initial mix of customers."

Now that the market has matured, subscribers who were once low MoU and ARPU customers now are taking advantage of digital plans such as 1-rates.

"More and more people are communicating with their wireless phones," Marshall said. "And while wireless certainly isn't replacing wireline yet, subscribers who have, say, 500 minutes left on their digital plan will more often choose to use their wireless phone to place a call rather than using a payphone."

Powertel President & CEO Allen Smith attributed Powertel's first-quarter increases in wireless subscriber base and revenue in part to its economic range of pre- and post-paid service plans.

"We've only had two full quarters of prepaid since we launched it back in September of '98," said Kevin Inda, Powertel vice president of investor and public relations. "And we've packaged it very differently from our competitors."

Powertel markets its prepaid service at a flat rate of 35 cents per minute which includes long-distance. Subscribers get the 35 cents-per-minute rate anywhere within Powertel's 12-state footprint.

"Our prepaid customers enjoy ubiquity with Powertel that they can't get with other carriers," Inda said. "For example, if our customers leave their metro area, they don't get hit with the buck-a-minute roaming fees that they would pay our competitors."

Inda attributes Powertel's increase in prepaid ARPU to its availability as well as its economy.

"Our prepaid service offers a better deal and can be used in more cities in the southeast," Inda said. "Thus people have been burning through a lot more minutes, and that's what we attribute the increase in ARPU to."

Such continuous, ubiquitous growth in carrier profits seems almost unreal. Yet predictions for the future call for even more.

"One-rate plans have been highly successful in boosting MoU," said Ken Hyers, Cahners In-Stat industry analyst. "So much so that they've become the battlefront -- the first wave in real wireline replacement."

Bell Atlantic Mobile (BAM) credits its popular digital services, especially its SingleRate price plans, as strong contributing factors to its subscriber increase.

BAM added 190,000 customers, 49.6% more than in first quarter 1998, and ended the quarter with more than 6.2 million customers, an increase of 16.6%.

BAM's increase in subscriber numbers nearly paralleled its increase in domestic revenue -- a 15.7% increase over the year-ago quarter for a total of $990 million, with an ARPU of $48.

BAM's numbers thus far support Hyers' prediction that, despite national competition, the success of 1-rate regional programs such as BAM's SingleRate will continue to grow.