• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Third-Quarter Earnings Soar at Cingular Wireless

Posted on: Thursday, 20 October 2005, 15:00 CDT

By Scott Leith, The Atlanta Journal-Constitution

Oct. 20--Cingular Wireless' earnings soared in the third quarter, but overall results were mixed as subscriber growth slowed.

Atlanta-based Cingular, the nation's largest cellphone provider, added 867,000 customers in the previous quarter, putting the company's total at 52.3 million.

That keeps Cingular ahead of No. 2 Verizon Wireless, which is scheduled to release updated figures Oct. 27. Analysts, however, had expected Cingular to boost its subscriber figures by about 1 million.

It had added 1.4 million customers in the first quarter and 952,000 in the second.

Cingular's net earnings were $222 million, up 56.3 percent from the third quarter of 2004. Revenue grew 103.8 percent to $8.7 billion.

Those figures jumped largely because last year's numbers didn't include results for AT&T Wireless, which Cingular acquired in October 2004. Adjusted for purposes of comparison, Cingular's revenue climbed 6.2 percent; the company did not provide an adjusted earnings figure.

15,000 jobs shed Digesting Cingular's $41 billion purchase of AT&T Wireless continues to be a major focus at the company. Ralph de la Vega, chief operating officer, said during a conference call with analysts Wednesday that the company is "ahead or on schedule" with its integration work, including a vast simplification of the network that serves cellphone users.

Pete Ritcher, chief financial officer, said Cingular has shed the equivalent of 15,000 full-time jobs this year, far ahead of original expectations of about 10,000.

In an interview, Ritcher said most cuts have been in the ranks of contractors and outsourced workers who held jobs in customer service.

Cingular also cut 2,500 employees from within and lost 4,000 because of attrition and other factors.

Cingular has been able to reduce its work force, Ritcher said, in part because so many customers have shifted from old AT&T Wireless plans to Cingular offerings. With that transition largely done, the volume of calls for customer assistance has fallen, he said, reducing the need for staffers.

However, the merger has been a factor in losing some users.

Cingular reported that customer turnover, or churn, was 2.3 percent, up from 2.2 percent in the second quarter and almost twice as high as Verizon's most recently announced figure of 1.2 percent.

Ritcher said Cingular's churn numbers are higher at this time as a result of an unusually large number of contract expirations in the third quarter and because Verizon is not going through a merger.

"We're on a journey right now to go to sort of a single system, a single network," Ritcher said. "They basically went on that journey long ago."

Analysts were focused on other performance measures, too.

Average revenue per user declined 5.2 percent to $49.65, pulled down by factors such as the transition of customers to cheaper phone plans.

Another key measure, operating income before depreciation and amortization divided by service revenue, was 31.6 percent when adjusted for one-time factors. Analyst Jason Armstrong, of Goldman Sachs, said in a report that the figure was higher than expected, offsetting an increase in churn.

The third quarter featured a number of unusual costs. Cingular said it spent $241 million on integration and $96 million on the fallout from hurricanes Katrina and Rita. De la Vega said the hurricanes disrupted service at more than 1,500 cell sites. Today, only six sites, all in New Orleans, remain unfixed.

Kevin Moore, of Wachovia Securities, said in a report that Cingular had a "relatively solid" quarter. "The strong revenue and margin results give us further optimism on the progress of the AT&T Wireless integration effort and the overall turnaround story," he said.

Cingular, while not a publicly traded company, announces details about its finances. The company is a joint venture of Atlanta-based BellSouth and SBC Communications of San Antonio.

BellSouth announces third-quarter earnings Tuesday.

-----

To see more of The Atlanta Journal-Constitution, or to subscribe to the newspaper, go to http://www.ajc.com.

Copyright (c) 2005, The Atlanta Journal-Constitution

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

BLS, SBC, VZ, VOD,

Source: The Atlanta Journal and Constitution

More News in this Category