Merrill Lynch raises wireless forecasts

Merrill Lynch predicted that major U.S. wireless carriers will see their subscriber numbers rise by 16 million during 2003--1 million more than it had previously estimated.

Verizon Wireless will see its customer count increase by 5 million, while AT&T Wireless' count will rise by 1.5 million customers, Merrill said in an industry outlook released this week. The estimates figure in the number of new subscribers versus the number of departing customers.

Merrill also revised its 2004 predictions from a customer increase of 11 million to an increase of 13 million.

Merrill said there seems to be a lot of pent-up demand for wireless phones, as more and more customers anticipate the implementation of wireless local number portability, which would allow them to swap their fixed-line phones for the wire-free variety without having to change their phone number. But, Merrill said, that could lead to further pricing competition. Number portability could also prompt wireless companies with fixed-line operations to become more aggressive to arrest the decline in fixed-line voice minutes.

'Instant Wi-Fi' mesh network Steve Tareq Hoque, CEO, Firetide

"In the near term, we think that strong subscriber growth and increased usage could result in solid third-quarter results," analyst Linda Mutschler noted. "The question is what happens as we move into 2004. After that we think that the picture becomes less clear. We are in an environment where we have rising subscriber expectations for 2004."

For the six national carriers, Merrill estimates that third-quarter gross additions will be up about 7 percent year-on-year, from 4.4 percent year-on-year growth in the second quarter. Gross numbers don't figure in customers who leave during a given period. The biggest gainer in gross additions is Cingular, while Verizon Wireless, Nextel and T-Mobile should also expect strong gross additions. AT&T Wireless' GoPhone, a set of plans aimed at short-term buyers, is gaining ground, but Sprint PCS continues to be lagging in gaining market share, Merrill said.

Merrill said its earlier projections for AT&T Wireless may not have fully reflected the impact of online sales, particularly for GoPhone. Overall, the company may end up with 1.5 million new customers in 2003.