USA Subscriber Target Lowered

Merrill Lynch has lowered their estimate for US wireless industry net additions in 2006 from 23 million to 22 million, owing to lowered estimates for Sprint. This yields an ending subscriber base growth of 11% YoY and penetration of 77% at year end. They estimate 19 million net additions in 2007, for subscriber growth of 8% YoY and 90% penetration in 2009.

A key driver in 2007, in their opinion, will be average revenue per unit (ARPU) performance relative to the slowing subscriber growth environment. Churn is the critical factor with regard to profitability in maturing markets. They do not think that wireless substitution for wireline has stabilized, but analysis shows that the remaining risk can vary by region.