January 24, 2007 9:26 AM PST
Cingular Wireless rings up profits
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Cingular, the largest wireless carrier in the U.S. in terms of subscribers, added 2.4 million customers in the quarter that ended in December. Cingular executives said it was the company's largest increase in subscribers since it merged with AT&T Wireless in 2004.
The company reported profits of $782 million, up from $204 million during the same quarter a year earlier. Revenue was up about 10 percent to $9.76 billion from $8.85 billion.
"We've done what we said we would do when we merged with AT&T Wireless," said Stan Sigman, chief executive officer of Cingular. "We've hit and exceeded targets, ramped up performance every quarter. We just had the best quarter since the merger. And with the AT&T and BellSouth merger, we have a great set of assets as part of the new AT&T. And we will become even stronger."
Cingular was formed in 2000 as a joint venture between BellSouth and AT&T. With its $85 billion acquisition of BellSouth, AT&T has taken full control of the wireless company. Executives said results for Cingular will be reported along with AT&T earnings going forward. As for the Cingular brand, Sigman said the name will be replaced by AT&T slowly over the next 12 months to ensure the name change doesn't impact growth targets.
Cingular said its average revenue per user, or ARPU, rose to $49.29 from $48.86 a year earlier. But it fell from $49.76 in the third quarter. The increase from a year earlier was largely due to more customers using data services, such as text messaging. The company said that subscribers sent more than 12 billion text messages, more than 180 million multimedia messaging service messages, and more than 160 million downloads in the quarter.
Of the 2.4 million new customers added in the fourth quarter, about 746,000 subscribed to Cingular's prepaid service, which typically produces less revenue per subscriber. Pete Ritcher, chief financial officer for Cingular, said the company feels confident about its prepaid cell phone business and that it plans to offer new phones to the lineup that can support more revenue-generating data services.
"The economics on prepaid services isn't the same as it is for post-paid," he said. "But we are strong in this part of the market and we feel really good about where we stand. We'll improve here as we keep churn where it is and start adding data services to prepaid to keep ARPU up."
Cingular's impressive growth in new customers likely comes at the expense of Sprint Nextel, which is suffering from higher churn rates as frustrated former Nextel subscribers cancel their service. Cingular ended the year with a total of 61 million customers.
Earlier this month, Cingular announced an exclusive deal with Apple to sell the new iPhone, a high-end handset that combines the functionality of a cell phone and an iPod music player. Cingular executives said they expect the iPhone to be a hot seller once it hits shelves in June.
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