Cingular adds 1.5M customers, boosts profits

Cingular in the second quarter added 1.5 million net subscribers, but it managed those gains while keeping its churn in check and recording its highest-ever profit. The carrier also announced impressive gains in data revenues and the addition of five new UMTS markets, including New York City.

Cingular produced $540 million in second-quarter profits for its parent companies AT&T and BellSouth, representing a 267% increase over $147 million recorded the same quarter last year. Its operating revenues also rose to $9.2 from $8.6 billion in the same period.

The 1.5 million net adds bring Cingular's subscriber base to 57.3 million, keeping its steady lead over challenger Verizon Wireless, which had 53 million customers at the end of March and has been adding customers at a similar pace to Cingular. Cingular's gross adds, however, were lower than in previous quarters, signing up only 4.4 million new customers. Cingular, however, managed to keep more existing subscribers from fleeing, reporting its lowest-ever churn rate of 1.7%, compared to 2.2% from last year and 1.9% in the first quarter.

Cingular has been embroiled in a multi-year integration after its acquisition of AT&T Wireless in 2004. While the quarters after the merger saw its numbers suffer, Cingular has righted itself, continuing to grow and outperform its competitors in key areas despite ongoing integration activity, said Ralph de la Vega, chief operating officer for Cingular.

"We've added 25.8 million customers since the merger," de la Vega said, referring to Cingular's gross adds. "That's as many customers as either AT&T Wireless or Cingular had before the merger."

As for the integration itself, all except 12% of the remaining AT&T Wireless cell sites have been folded into the combined network, which Cingular now describes as the gold network, to distinguish it from AT&T Wireless's "blue" and Cingular's "orange." On the billing side Cingular is dealing with the complications of having three separate billing platforms for post-paid services and four for pre-paid, but it expects by the end of 2006 to have all of its GSM subscribers on a single unified platform. Also by December, it plans to phase out completely its former pre-paid services and combine all of its GSM pre-paid customers under the new Go Phone service, de la Vega said.

Cingular last quarter built new UMTS/high speed downlink packet access (HSDPA) networks in New York City; Atlanta; San Antonio, Texas; Tuscon, Ariz.; and Gary, Ind., bringing its UMTS footprint to about 20 metropolitan areas encompassing 28 cities. Furthermore Cingular made significant strides in data ARPU, recording an average of $5.77 in data revenues per subscriber per month. Up from $5.22 last quarter and $4.16 last year, data revenues shot up to 12% of overall revenues for the quarter. If prepaid customers who don't access many data services are taken out of the equation, data ARPU would be $6.60 per month, said Pete Ritcher, Cingular chief financial officer.

Ritcher said those data revenues came almost entirely from its 2G network. Cingular expects a significant boost to those figures as its 3G network is rolled out nationwide by the end of the year, Ritcher said.