Small US Operators - Q4 2007 Results

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Since Rural Cellular Suncom and Dobson have been sold to Verizon T Mobile and AT T respectively there are now six mobile operators in the US which have between 250k and 10m customers. The largest of the six is US Cellular which finished 2007 on 6.122m customers. The only other two companies with more than 1m customers are MetroPCS and Leap with 3.963m and 2.864m respectively. The remaining three in order of magnitude are Qwest (0.824m) Cincinnati Bell (0.571m) and Ntelos (0.407m).

However, the figures for annual growth do not conform to this ranking, even when measured in absolute terms.

MetroPCS added over 1m customers for the second successive year, with 1.02m new connections in the year, while Leap recorded a 12.8% gain in annual net additions to 0.63m. This was over double the 0.31m net additions recorded by US Cellular in 2007, even though US Cellular is over twice the size of Leap. Cincinnati Bell and Ntelos, the two smallest operators, recorded 42.9k and 39.6k net new connections respectively. Both of these figures represented a significant improvement on the previous year's performance, with Cincinnati Bell's net additions up 32.0% and those at Ntelos up 28.2%. Qwest, which has over twice as many customers as Ntelos, recorded the lowest figure for net additions in 2007 with just 23k new connections, a 25.8% drop on 2006.

In proportionate terms, MetroPCS led the way with a 34.7% annual uplift to customer numbers, although this was down from 52.8% in 2006. Leap also recorded a slight slowdown in growth, from 33.7% to 28.4%. Ntelos was the third fastest growing with a 10.8% annual growth rate, up 1.6pp year on year, while Cincinnati Bell was up 1.5pp at 8.1%. US Cellular and Qwest recorded annual growth rates of just 5.3% and 2.9% respectively, and both saw a decline in growth compared to 2006, when US Cellular saw 6.1% growth and Qwest 4.0%.

A glance at the ARPU figures reveals that Ntelos is the only one of the six small US operators to record a figure above $50 per month in every quarter of 2007; indeed, having broken through the $55 dollar barrier in Q1 07, it managed to maintain this level throughout the year and posted an annual average only 2 cents short of $56, a 4.5% increase on the 2006 average. These are the best results ever recorded by Ntelos, which operates solely in the states of Virginia and West Virginia. The combined effect of record ARPU and double digit growth to the customer base was a 17.2% rise in wireless revenues to $377.8m in 2007.

The second highest ARPU figures were recorded by US Cellular, the only other operator with a yearly average above $50 per month ($51.13). Although Q4 07 saw the first quarter-on-quarter decrease in ARPU for two years, US Cellular still managed to post a 7.7% increase in its annual average, the largest gain of the six small operators. This drove annual service revenues up 14.5% to $3,679.2m.
Qwest only quotes its ARPU figures to the nearest dollar, making detailed comparisons somewhat difficult. However, it is clear that its ARPU dropped in 2007 compared to the previous year, with the annual average down from $50 per month to $49. With an annual customer growth rate of just 2.9%, it is no surprise that wireless service revenues remained almost flat year on year, the $560m recorded in 2007 only 0.5% higher than the 2006 total.

In 2006, Leap posted an ARPU of $42.81 per month, seventeen cents behind MetroPCS, but a 4.9% year-on-year increase saw it leapfrog its rival and it finished the year with a monthly average of $44.92, almost two dollars above the $43.03 posted by MetroPCS. Despite this excellent result for Leap, MetroPCS's strong customer growth saw it outpace its rival in terms of revenue growth, a 48.6% rise taking its yearly total to $1,919m, while Leap was up 45.9% to $1,396m.

Cincinnati Bell has recorded the lowest ARPU across the six small operators for the past two years, and despite a 4.9% annual increase, its monthly ARPU remained below $40 in 2007 at $39.72. This is 41% lower than the figure recorded by Ntelos, and although Cincinnati Bell has a larger subscriber base, its lower ARPU meant that its annual wireless revenue of $294.5m was 22% lower than that of Ntelos.

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Proportionate Annual Customer Growth

Quarterly Average ARPU per Month

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Tags: metropcs  qwest  arpu  us cellular  bell  ntelos  cincinnati bell  virginia  cincinnati 

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