categories

HOT TOPICS

NEWSLETTER

If you are considering becoming a 1M/1M premium member and would like to join our mailing list to receive ongoing information, please sign up here.

Subscribe to our Feed

Wireless Carriers RoundUp

Posted on Tuesday, May 13th 2008

AT&T must be thankful for the phenomenon called iPhone. Last month, on April 22, it announced its Q1 results. Though its share of fixed lines has been shrinking, its growth in the wireless segment is helping it offset the weakening core business. In this post, I will compare the progress of the wireless carriers. Earlier comparison in the wake of the iPhone is available here.

AT&T, covered here earlier, (NYSE: T) reported Q1 revenue was $30.7 billion, up 6.1% y-o-y and 4.6% q-o-q. Net income was $3.5 billion, up 21.5% from $2.8 billion in the year-earlier first quarter, and reported earnings per diluted share of $0.57, up 26.7% from $0.45 in the first quarter of 2007. Adjusted EPS was up 13.8% to $0.74. It paid dividends of $2.4 billion and repurchased 111.6 million shares for $4.1 billion.

Segment-wise, Wireless revenue grew 18.3% to $11.8 billion or 38.5% of total revenue driven by strong customer additions and higher ARPU. Net additions in the quarter were 1.3 million taking the total wireless customer count to 71.4 million. The shutdown of AT&T’s TDMA wireless network in late February reduced its net adds by 330,000. Wireless data grew by more than 57% and accounts for 21.5% of wireless revenue reflecting the growing trend of mobile Internet access, messaging and mobile video.

Even in Wireline, broadband revenues grew 13.2% to $1.4 billion. Its U-verse TV service also had strong growth with net subscriber gain of 148,000 to a total of 379,000. Two years back, when it acquired the former AT&T, its Enterprise revenues were on the decline but today with growing demand for IP services, it had a growth of 1.2%. It also won a major 5-year contract with Royal Dutch Shell. Growth in broadband, TV, and enterprise somewhat offset the decline in traditional wireline access and the segment revenue declined 2% to $17.6 billion.

There has been speculation that AT&T is going to subsidize $200 off the iPhone price. With monthly ARPU from iPhone customers in the range of $95, this subsidy is going to be a win-win situation for AT&T as well as Apple, because AT&T pays $18 per month to Apple for every iPhone activation. With the new 3G iPhone round the corner and this rebate, iPhone sales would easily cross the 10 million target, maybe more. Both AT&T and Apple seem to be going for a market share game!

As for AT&T’s main rival, Verizon, it had higher net adds at 1.5 million in Q1 compared to 1.7 million last year and 2 million last quarter. However, Verizon is still No.2 wireless carrier with 67.2 million customers. It continues to have the lowest churn in the industry at 1.2% while AT&T had churn rate of 1.7% in Q1. Wireless revenue was $11.7 billion (vs. AT&T’s $11.8 billion), up 13.2% and data revenues were up 48.9% to $2.3 billion.

As for the $99.99 monthly unlimited calling plan introduced in February, Verizon said 13% of its new customers opted for the plan while AT&T had 4% customers choosing the plan.

On April 28, Verizon(NYSE: VZ) reported Q1 revenue of $23.8 billion, up 5.5% and EPS of 57 cents. Adjusted WPS was 61 cents, in-line with analyst estimates. It repurchased $1 billion of its common stock.

Like AT&T, Verizon is also facing low demand for wireline and it has spun off nonstrategic access lines in Maine, New Hampshire and Vermont. And in 2007, it reduced its wireline workforce by 6,550. However, its FIOS TV is going strong and broadband and video revenues were over $1 billion in the quarter.

Verizon is trading around $38 with market cap of $108 billion while AT&T is trading around $39 with market cap of around $232 billion. VZ had a 52-week low of $33.15 on March 17 while AT&T had a 52-week low of $32.95 on February 20.

Chart for AT&T Inc. (T)

AT&T and Verizon’s gain is Sprint’s pain. The No.3 in the wireless industry, Sprint lost 1.09 million subscribers in the quarter and ended up with 52.8 million total subscribers. Churn rose to 2.45%, up from 2.3% the previous quarter. To top it, the customers it is losing have higher ARPUs, which is driving its ARPU down 6% to $56 and its wireless revenue down 9% y-o-y and 6% q-o-q to $7.4 billion.

Sprint Nextel Corp (NYSE: S) reported a weak first quarter yesterday with a net loss of $505 million or $0.18 a share, more than double its loss in Q1 2007. Revenue fell 8% y-o-y and 5% q-o-q to $9.3 billion Adjusted net income was approximately $112 million, or $0.04 per share. Wireline revenues increased 2% y-o-y and 1% q-o-q to $1.6 billion.

Adding to its woes, its $35 billion Nextel acquisition in 2005 hasn’t yet been integrated successfully. In fact there was speculation that it is considering selling the Nextel business. But its new CEO Dan Hesse refuted these reports in the earnings call. It is instead planning an iDEN BlackBerry with WiFi that will hopefully help in keeping its iDEN subscribers happy. Its iDEN subscribers base has shrunk 26% y-o-y.

In light of its misfortunes, does Sprint’s recently announced $14.5 billion WiMax joint venture with Clearwire bring in a ray of hope? The joint venture will also get $3.2 billion from Intel, Comcast, Time Warner, Google and Bright House Networks.

The No.4 in the wireless industry, T-Mobile USA is doing better than Sprint in terms of net adds. It added 981,000 customers in Q1. It also closed its SunCom Wireless acquisition this quarter which added another 1.1 million customers taking its total customer count to 30.8 million. Contract customer churn was 1.7%, down from 1.8% last quarter. ARPU was $51, down from $52 in Q4. Last week, it launched its 3G network in New York City.

T-Mobile’s parent company Deutsche Telekom AG (NYSE:DT) reported its Q1 results on Thursday. T-Mobile USA had revenue of $5.19 billion, up 14% y-o-y and 2% q-o-q. Net income was $462 million, up $315 million in Q1 last year and from $383 million in Q4. DT had revenue of EUR 15 billion ($23.14 billion), down 3% y-o-y. Net profit increased EUR 0.5 billion y-o-y to EUR 0.9 billion. DT also acquired Orange Nederland which helped increase T-Mobile’s worldwide customer base to 123 million.

DT is trading around $18 and its market cap is around $80 billion. It hit a 52-week low of $16.11 on March 20. There is speculation that DT is considering bidding for Sprint, which would be a bad idea if Sprint keeps its Nextel unit. Sprint is trading around $9 after hitting a 52-week low of $5.48 on March 18. Its market cap is around $26 billion.

Chart for Sprint Nextel Corp. (S)

Hacker News
() Comments

Featured Videos

Comments

[…] that’s Sprint, usually ranking as the number three or four player in the industry. (When kids can hack into their school’s computers and change their grades, […]

Triangulation « From Pine View Farm Wednesday, March 17, 2010 at 4:11 AM PT