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Cingular Wireless Reports Fourth-Quarter and Full Year Results, Launches Network Expansion and Customer Service Initiatives

Posted on: Wednesday, 21 January 2004, 06:00 CST

ATLANTA, Jan. 21 /PRNewswire/ -- Cingular Wireless LLC, the United States' second largest wireless company, today reported fourth-quarter results that include continued strong subscriber growth and additional progress in its nationwide GSM/GPRS network overlay.

For the three months ended December 31, 2003, Cingular, a joint venture between SBC Communications and BellSouth Corporation , achieved net subscriber additions of 642,000, bringing its nationwide cellular/PCS customer base to over 24 million. Gross adds in the fourth quarter totaled 2.6 million, the second highest quarter in Cingular's history -- bested only by third-quarter 2003's 2.7 million. Churn was 2.8 percent, in line with third-quarter 2003 results. Porting requests under wireless local number portability rules implemented in November were below expectations and not a significant factor in the quarter's results.

For the full year 2003, Cingular Wireless added 2.1 million subscribers, the strongest annual net add total in the company's history.

Cingular has achieved this subscriber growth while executing a nationwide network overlay of a next generation GSM/GPRS technology. As of Dec. 31, Cingular's GSM/GPRS network was available to 93 percent of the company's operational POPs, up from approximately 66 percent six months earlier and 81 percent at the end of the third quarter. Cingular continues to run ahead of its original schedule for GSM/GPRS deployment and expects to achieve 100 percent coverage of its network in 2004. Additionally, the vast majority of the new networks are already performing at or exceeding strict quality standards and bringing our GSM customers the truest voice quality of any wireless company.

Customer response to GSM/GPRS continues to be strong as 57% of Cingular's total minutes are now carried on the GSM network. GSM is the world's most popular wireless technology, with more than 900 million subscribers in 200 countries. It provides customers the widest selection of handsets in the industry with features like color screens and built-in cameras and the latest data services, including multi-media messaging and high speed packet data. For example, Cingular currently offers 14 handsets from 6 different vendors, all of which either have built-in cameras or camera attachments for use with multi-media messaging. At year's end, more than 45 percent of Cingular's handsets in service were GSM capable, up from 27 percent at the end of the second quarter of 2003 and 35 percent at the end of the third quarter.

In 2003, Cingular led the industry in total data revenue, increasing almost 60% over 2002, driven by an 85% increase in short messaging service (SMS) volumes combined with continued strength in its proprietary Mobitex data-only network that served 789,000 subscribers at the end of the year. During 2003, Cingular successfully launched a host of new data applications like instant messaging and multi-media messaging that will continue to drive data revenue growth into 2004.

"Cingular took huge steps forward in 2003," said Stan Sigman, President and CEO of Cingular Wireless, "and I am very proud of how well Cingular's talented employees executed over the past year. We accelerated subscriber growth. We moved our nationwide network conversion forward ahead of schedule, delighting customers with the quality of GSM. And we delivered a host of innovations through new data services and products that integrate wireless and wireline communications."

"Now, our clear goal is to move Cingular to the next level," Sigman continued, "and build an even stronger foundation for sustained growth. The keys are outstanding network performance and a world-class customer experience. To achieve these goals, we have launched two major initatives. The first is a nationwide drive to improve coverage and network quality. We started this initiative in the fourth quarter by adding more than 750 cell sites, and it will continue through 2004. This program builds on the progress we've made with GSM/GPRS and the moves we've made to add spectrum. The second initiative, which also has already begun, is a comprehensive enhancement of our customer service systems and procedures. While these projects pressure margins in the near term, they will strengthen our growth prospects long term. I am very confident in our ability to deliver on these initiatives, and I am excited about what Cingular can accomplish in 2004."

Financial Results

Cingular's fourth-quarter financial results were shaped by continued strong subscriber growth and by aggressive execution in terms of network overlay, customer retention programs and new network expansion and customer service initiatives.

* Fourth-quarter revenues grew to $3.9 billion, up 5.6 percent compared

with the year-ago fourth quarter.

* Cellular/PCS data revenue increased 85 percent year-over-year, largely

due to rising popularity of SMS (short messaging service), as well as

downloadable ringtones and photo messaging. Cingular delivered over 1

billion SMS messages during the quarter.

* Cellular/PCS ARPU (average revenue per user), which represents the

service revenue per subscriber, was $49.03, down $2.81 from fourth

quarter of last year.

* Total operating expenses were $3.6 billion in the fourth quarter, up

12.4 percent from $3.2 billion in the year-ago period. Expenses were

driven by significantly higher gross customer additions, extensive

customer retention programs, increased advertising and costs associated

with launching wireless local number portability.

* Operating income was $329 million for the quarter, compared with $516

million for the same quarter a year ago.

In the fourth quarter, to be consistent with emerging industry practices, Cingular's income statement presentation was changed for the current and prior year periods to reflect, as revenues, billings to our customers for the Universal Service Fund (USF) and other regulatory fees and to reflect, as expenses, the costs related to payments into the associated regulatory funds. The impact of this change on fourth quarter revenues and expenses was $96 million. These revenues and expenses for the same quarter a year ago were $47 million. Operating income and net income for all periods have been unaffected.

Enhanced spectrum position

As it has deployed its GSM/GPRS network, Cingular has also made strategic moves to enable access to new markets and to improve its spectrum position in existing markets. These initiatives will enable Cingular to expand its network, increase capacity and lower roaming costs.

* In December, Cingular closed its transaction with Sunshine PCS

purchasing additional spectrum in the Florida markets of Tallahassee,

Panama City, and Ocala.

* Cingular agreed to purchase wireless licenses from NextWave Telecom

Inc. for $1.4 billion. These licenses cover approximately 83 million

POPs in 34 markets. The transaction requires FCC approval, and

Cingular expects the transaction to close in the first half of 2004.

* In September, Cingular agreed to acquire additional PCS spectrum and

operations in Texas, Arkansas, and Louisiana and cellular operations in

Louisiana through an agreement with US Unwired Inc. This transaction

is expected to close in the first quarter of 2004.

* In October, Cingular announced an agreement with Dobson Communications

to exchange Dobson's ownership in its Eastern Shore of Maryland

cellular property for Cingular's ownership in its Northwest Michigan

cellular property. This transaction is also expected to close in the

first quarter of 2004.

Wireless data initiatives

* Cingular is moving forward in implementing EDGE (Enhanced Datarate for

GSM Evolution) high speed data technology throughout its network.

Cingular was the first carrier in the world to launch EDGE when it

turned up its network in Indianapolis in July 2003. Cingular will have

substantially all of its markets enabled in the high speed EDGE

technology by mid-2004. EDGE allows for data rates up to 170 Kbps with

average speeds ranging between 75-135 Kbps. The EDGE deployment will be

completed in 2004.

Wireless/Wireline Integration

Cingular and its parent companies SBC Communications and BellSouth Corporation continue to exploit the opportunities and benefits of wireless and wireline integration.

* 10% of Cingular's gross postpaid customer additions for the quarter

were from the parents' sales channels. These channels contributed over

875,000 wireless customers during 2003.

* In October Cingular introduced FastForward(TM) -- the first device that

marries the convenience of wireless service with your home or office.

The patented device -- designed as a cradle to hold a wireless phone --

simply plugs into an electrical outlet. When the Cingular Wireless

phone is "cradled," calls to the wireless phone are forwarded to a

designated landline phone, while the wireless phone's battery is

automatically re-charged.

ABOUT CINGULAR WIRELESS

Cingular Wireless, a joint venture between SBC Communications and BellSouth , serves more than 24 million voice and data customers across the United States. A leader in mobile voice and data communications, Cingular is the only U.S. wireless carrier to offer Rollover(TM), the wireless plan that lets customers keep their unused monthly minutes. Cingular has launched the world's first commercial deployment of wireless services using Enhanced Datarates for GSM Evolution (EDGE) technology. Cingular provides cellular/PCS service in 43 of the top 50 markets nationwide, and provides corporate e-mail and other advanced data services through its GPRS, EDGE and mobitex packet data networks. Details of the company are available at http://www.cingular.com/ .

Get Cingular Wireless press releases e-mailed to you automatically. Sign up at http://www.cingular.com/newsroom

BellSouth's fourth quarter earnings conference call, during which Cingular's earnings results will be discussed, will be held at 10 a.m. Eastern time on January 22, 2004 at http://www.bellsouth.com/investor/ .

SBC's will host its fourth quarter earnings conference call, during which Cingular's earnings results will be discussed, on Jan. 27, 2004. It will be broadcast live via the Internet at 10 a.m. Eastern time at http://www.sbc.com/investor_relations .

Forward-looking Information: In addition to historical information, this document and the conference calls referred to above may contain forward- looking statements regarding events and financial trends. Factors that could affect future results and could cause actual results to differ materially from those expressed or implied in the forward-looking statements include:

* the pervasive and intensifying competition in all markets where we

operate;

* problems associated with the transition of our network to higher speed

technologies;

* slow growth of our data services due to lack of popular applications,

terminal equipment, advanced technology and other factors;

* shortages and unavailability of spectrum for new services and

geographic expansion;

* sluggish economic and employment conditions in the markets we serve;

* changes in available technology that make our existing technology

obsolete or expensive to upgrade;

* the final outcome of FCC proceedings, including rulemakings, and

judicial review, if any, of such proceedings;

* impact of local number portability on our growth and churn rates,

revenues and expenses;

* enactment of additional state and federal laws, regulations and

requirements pertaining to our operations;

* availability and cost of capital;

* impact of any industry consolidation; and

* the outcome of pending or threatened complaints and litigation.

Such forward-looking information is given as of this date only, and Cingular assumes no duty to update this information.

CINGULAR WIRELESS LLC

Exhibits - Cingular Wireless LLC Selected Financial Statements and

Operating Data

Cingular Wireless LLC Income Statement - amounts in millions (unaudited)

Quarter Ended Year to Date

12/31/03 12/31/02 %Change 12/31/03 12/31/02 %Change

Operating revenues:

Service revenues $3,534 $3,460 2.1% $14,223 $13,922 2.2%

Equipment sales 378 244 54.9% 1,260 981 28.4%

Total operating

revenues 3,912 3,704 5.6% 15,483 14,903 3.9%

Operating expenses:

Cost of services 938 1,044 (10.2%) 3,652 3,571 2.3%

Cost of equipment sales 578 361 60.1% 2,031 1,535 32.3%

Selling, general and

administrative 1,495 1,316 13.6% 5,422 5,426 (0.1%)

Depreciation and

amortization 572 467 22.5% 2,089 1,850 12.9%

Total operating

expenses 3,583 3,188 12.4% 13,194 12,382 6.6%

Operating income 329 516 (36.2%) 2,289 2,521 (9.2%)

Interest expense 204 232 (12.1%) 856 911 (6.0%)

Minority interest expense 17 31 (45.2%) 101 123 (17.9%)

Equity in net income

(loss) of affiliates (88) (76) 15.8% (323) (265) 21.9%

Other income (expense),

net 4 7 (42.9%) 41 29 41.4%

Income before income tax

and cumulative effect

of acctng. chg. 24 184 (87.0%) 1,050 1,251 (16.1%)

Provision for income taxes 8 3 166.7% 28 12 133.3%

Income before cumulative

effect of accounting

change 16 181 (91.2%) 1,022 1,239 (17.5%)

Selected Financial and Operating Data for Cingular Wireless

- amounts in millions, except customer data in 000s

Quarter Ended

12/31/03 12/31/02 %Change(f)

(Amounts in millions, except customer

data in 000s)

Total Cellular/PCS Customers (a) 24,027 21,925 9.6%

Net Customer Additions - Cellular/PCS 642 (121) NM

M&A Activity, Partitioned Customers

and/or Other Adjs. - 31

Churn - Cellular/PCS (b) 2.8% 2.7% +10BP

ARPU - Cellular/PCS (c) $49.03 $51.84 (5.4%)

Minutes Of Use Per Cellular/PCS Subscriber 475 406 17.0%

Licensed POPs - Cellular/PCS (d) 236 219

Penetration - Cellular/PCS (e) 10.8% 10.1%

Total Cingular Interactive Customers 789 817 (3.5%)

Net Customer Additions - Cingular Interactive 1 16 (93.9%)

Year to Date

12/31/03 12/31/02 %Change(f)

(Amounts in millions, except customer

data in 000s)

Total Cellular/PCS Customers (a) 24,027 21,925 9.6%

Net Customer Additions - Cellular/PCS 2,116 359 488.0%

M&A Activity, Partitioned Customers

and/or Other Adjs. 14 32

Churn - Cellular/PCS (b) 2.7% 2.8% -10BP

ARPU - Cellular/PCS (c) $51.32 $52.14 (1.6%)

Minutes Of Use Per Cellular/PCS Subscriber 446 390 14.4%

Licensed POPs - Cellular/PCS (d) 236 219

Penetration - Cellular/PCS (e) 10.8% 10.1%

Total Cingular Interactive Customers 789 817 (3.5%)

Net Customer Additions - Cingular Interactive (29) 84 (133.7%)

In an effort to be consistent with emerging industry practices, the income

statement for all periods presented has been changed to reflect billings

to our customers for the Universal Service Fund (USF) and other regulatory

fees as "Service revenues" and the related payments into the associated

regulatory funds as "Cost of services" expenses. Operating income

and net income for all periods have been unaffected.

Notes:

(a) Cellular/PCS subscribers include customers served through reseller

agreements.

(b) Cellular/PCS subscriber churn is calculated by dividing the aggregate

number of cellular/PCS subscribers who cancel service during each

month in a period by the total number of cellular/PCS subscribers

at the beginning of each month in that period.

(c) ARPU is defined as cellular/PCS service revenues during the period

divided by average cellular/PCS subscribers during the period.

(d) Licensed POPs refers to the number of people residing in areas where

we and our partners, Salmon and T-Mobile USA, Inc., have licenses to

provide cellular or PCS service, including the New York City

metropolitan area, and in areas where we have not yet commenced

service, such as the Salt Lake City area.

(e) Penetration calculation is based upon licensed operational POPs of 222

million. The New York City metropolitan area is included in the

penetration calculation, beginning in the third quarter of 2002.

(f) The percentage change for the number of customers and net customer

additions is calculated based upon the actual whole numbers.

Cingular Wireless LLC Balance Sheet - amounts in millions (unaudited)

12/31/03 12/31/02 Incr(Decr) % + / -

(audited)

Assets

Current assets:

Cash and cash equivalents 1,139 908 231 25.4%

Accounts receivable - net of

allowances for uncollectibles 1,592 1,520 72 4.7%

Inventory 273 126 147 116.7%

Prepaid expenses and other current

assets 296 177 119 67.2%

Total current assets 3,300 2,731 569 20.8%

Property, plant and equipment - net 10,939 10,146 793 7.8%

Intangible assets - net 8,773 8,538 235 2.8%

Other assets 2,514 2,707 (193) -7.1%

Total assets 25,526 24,122 1,404 5.8%

Liabilities and members' capital

Current liabilities:

Debt maturing within one year 95 45 50 111.1%

Accounts payable and accrued

liabilities 3,092 2,742 350 12.8%

Total current liabilities 3,187 2,787 400 14.4%

Long-term debt to affiliates 9,678 9,678 - 0.0%

Long-term debt to external parties 2,914 2,868 46 1.6%

Total long-term debt 12,592 12,546 46 0.4%

Other noncurrent liabilities 604 681 (77) -11.3%

Minority interests in consolidated

entities 659 567 92 16.2%

Members' capital 8,484 7,541 943 12.5%

Total liabilities and members'

capital 25,526 24,122 1,404 5.8%

Cingular Wireless

CONTACT: Investor Relations, Kent Evans, +1-404-236-6203, orkent.evans@cingular.com, Media Relations, Clay Owen, +1-404-236-6153 (office),+1-404-538-0124 (wireless), or clay.owen@cingular.com

Web site: http://www.cingular.com/http://www.cingular.com/newsroomhttp://www.bellsouth.com/investorhttp://www.sbc.com/investor_relations

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