Cingular Posts Loss, But Subscribers Grew

 
 
By Sinead Carew, Reuters  |  Posted 2005-01-24 Print this article Print
 
 
 
 
 
 
 

Cingular Wireless posted a fourth-quarter loss as expenses rose due to its purchase of AT&T Wireless, but it added roughly twice the number of subscribers Wall Street expected.

NEW YORK (Reuters)—Cingular Wireless on Monday posted a fourth-quarter loss as expenses rose due to its purchase of AT&T Wireless, but it added roughly twice the number of subscribers Wall Street expected. Cingular, the biggest U.S. mobile provider, posted a loss of $497 million, compared with a profit of $16 million a year earlier. The company closed its acquisition of AT&T Wireless in late October. It recorded $245 million of merger-related expenses and $1.39 billion worth of depreciation costs also related to the deal, the company said.
Cingular, the mobile venture of SBC Communications Inc. and BellSouth Corp. said it added 1.8 million customers. This compared with Wall Street targets of about 900,000, according to seven analysts contacted by Reuters.
"Were off to a really good start with our net customer adds," said Chief Financial Officer Peter Ritcher. He said the growth was due to heavy post-merger marketing and the popularity of discount family plans and new phones including the hot-selling Razr V3 model from Motorola Inc. Cingular surpassed Verizon Wireless as the biggest U.S. mobile operator by buying AT&T Wireless, but analysts have been skeptical about the combination of two companies with high customer turnover rates. Some were concerned Cingular sacrificed fourth-quarter revenue growth in order to add new customers as its average monthly revenue per user fell 5.8 percent to $49.67. "In my opinion the very big net add figure was overshadowed by a steep drop in average revenue per customer," said Kevin Roe of Roe Equity Research. Others said that if Cingulars apparent focus on growth above profitability continues throughout 2005 it could put pressure on rivals such as Verizon, Sprint Corp. and Deutsche Telekoms T-Mobile USA. "That will be the big question for competitors such as Verizon, Sprint and T-Mobile USA," said Deutsche Bank analyst Victor Shvets who noted that Cingular has a 28 percent share of the U.S. mobile market. Cingular said 2005 revenue would increase from 2004 and its profit margins would improve but it did not give details. It expects to spend $6.8 billion to $7.2 billion on network expansion and the development of data services. Its fourth quarter revenue, including phone and service sales, rose 1.8 percent to $8.1 billion from the same quarter a year earlier, on a pro forma basis, which assumes it owned AT&T Wireless for the entirety of both quarters. Churn, or the percentage of customers canceling their service, was 2.6 percent compared with targets for just over 3 percent, according to five analysts polled by Reuters. SBC shares were up 39 cents at $24.97 on the New York Stock Exchange, where BellSouth stock was up 23 cents at $26.88.
 
 
 
 
 
 
 
 
 
 
 

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