Cingular 4Q Profit Nearly Quadruples
By MICHELLE ROBERTS
SAN ANTONIO – Cingular Wireless LLC, the nation’s largest cell phone provider, said Wednesday its fourth-quarter profit nearly quadrupled, boosted by customer growth during the holidays.
Cingular said it earned $782 million during the fourth quarter, compared with $204 million in the same quarter of 2005. The company reported revenue of $9.8 billion, up 10 percent from $8.8 billion in the same period of 2005.
The company, which was rebranded under the AT&T Inc. name last week, was a joint venture of Atlanta-based BellSouth Corp. and AT&T before AT&T completed its $86 billion purchase of BellSouth last month. The wireless company will report earnings as part of the parent company in future quarters.
The wireless unit’s growth in the fourth quarter was driven in part by a net increase of 2.4 million customers during the holiday quarter, typically the heaviest selling season for cell phones. Cingular has more than 60 million customers.
Company executives had said Cingular’s churn rate – the percent of customers who switch to other carriers – could increase from new lows. But in the fourth quarter, the churn rate was 1.5 percent, the same as in the third quarter and lower than the 1.9 percent it reported in the year-ago quarter.
Stan Sigman, the company’s president and CEO, said reduced churn has been a key to growth in subscribers and profits.
“We’ve made significant improvements in the last two years,” he said, despite efforts to encourage customers off older technologies. “We started with a great plan and we’ve executed flawlessly.”
The company continues to project low double-digit growth in revenue in 2007, driven by increased use of data services. Data service sales are offsetting declining revenue in voice services, he said.
Sigman also predicted sales of iPhones, Apple Inc.’s new cell phone-music player, would drive wireless company subscriber additions in the second half of the year. Cingular has an exclusive multiyear deal to offer the much-hyped device and will be able to sell services in Apple’s stores as well as their own.
“The only word to describe the iPhone is ‘wow,’” Sigman said. “I have no doubt the iPhone will be a big seller.”
The rebranding of Cingular to AT&T will be done aggressively, but Sigman said company executives will rely on market research to tell them when it’s time to remove the old Cingular signs. He hopes the transition will be done by this year’s holiday season.
“While no brand transition is easy, we’ve done it many times before. We know how to do it, and we know how to do it well,” Sigman said.
Cingular’s name and orange “Jack” logo have been around only six years. AT&T Wireless customers became Cingular customers in 2004 when Cingular bought the company – and before either company knew they’d be united under the AT&T brand again in just two years.
Still, company executives insist the merger allows synergies and opportunities for new sales. Last Friday, AT&T began allowing customers to make and receive calls between land line and wireless users at no cost.
Company-owned wireless stores will soon also be reconfigured to help sell AT&T’s other services like DSL and television services, Sigman said.
The wireless unit reported net income for the year of $2.5 billion, compared to $333 million in 2005 and projected strong growth to continue in 2007.
“We’ll be harvesting off a lot of the work in 2006, and you should see that in our results as we start off the year,” said chief financial officer Pete Ritcher.
Shares of AT&T rose $1.32 to $36.67 in afternoon trading on the New York Stock Exchange.
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On the Net:
Cingular Wireless LLC: http://www.cingular.com