Market Downturn Leaves Wireless Unscathed

Wireless service providers are escaping the market downturn — so far.

Most of the major players met or beat subscriber growth expectations in the first quarter, new numbers show.

AT&T Wireless added 585,000 new customers, Cingular Wireless picked up 854,000 and Sprint PCS gained 812,000. Even the midsize operators saw impressive growth, with Leap Wireless International racking up 149,000 customers and Powertel, which VoiceStream Wireless has agreed to purchase, adding 108,000 users.

Verizon Wireless, the operator with the most customers nationwide, signed only 518,000 new customers, blaming a recent push to remove analog prepaid users from its books for the low numbers.

But some operators are cautious about the future. AT&T Wireless said it has felt signs of the softening economy. Customers are opting for lower monthly recurring-charge pricing plans, and price competition is increasing, said Joe McCabe, vice president and chief financial officer at AT&T Wireless.

Still, McCabe said he anticipates that AT&T Wireless will add enough new customers to increase its base by slightly more than 20 percent and meet second-quarter expectations. The company also said it would meet earlier revenue guidance of 30 percent to 35 percent gains in the second quarter, probably hitting the lower target.

Leap, on the other hand, expected to be right on schedule with its plans to reach 1 million customers by the end of the year.

While it may seem baffling that wireless operators can be posting on-target subscriber numbers while their equipment suppliers are struggling, some analysts blamed the troubles of European operators for the vendor crunch. "Times are good for U.S. carriers because they arent as loaded with debt like their European counterparts," said Andrew Cole, global wireless practice leader at consultant Adventis.

Many operators in Europe bid billions of dollars on next-generation spectrum, inhibiting their abilities to make gear investments, which in turn has hurt vendors. The European buying slowdown could have an effect on the market leadership position companies there have held. "Europeans have lost their lead in wireless over the U.S.," Cole said.