NEW YORK -(Dow Jones)- Alltel Corp.'s rate of average revenue per user growth is likely to slow in 2006, an executive said Friday.
The increased importance of family plans, combined with an anticipated drop in revenue it will receive from the states via the universal service fund, will likely cause a deceleration from the 5% average revenue growth seen last year, Kevin Beebe, group president of operations for Alltel, said during a conference call to discuss the company's fourth-quarter results.
The company recognizes that it will need to stay aggressive in family plans to defend against turnover down the line, Beebe said. Family plans throughout the industry have gotten more competitive, with monthly rates falling. Alltel has yet to follow in dropping its prices but it has started offering more minutes. Beebe expects the trend to continue.
Still, he added that growth should come from the data revenue side, which has made progress in pushing text messaging and application downloads.
"We feel very good about 2006," he said.
The regional communications company reported net income of $255.1 million, or 66 cents a share, down from $270.6 million, or 89 cents a share, from a year ago. Earnings excluding integration and hurricane-related costs came in at 77 cents a share. Analysts, on average, had projected earnings of 83 cents a share.
Revenue, meanwhile rose 21% to $2.58 billion from $2.14 billion a year ago.
The fourth quarter was a busy one for Alltel. In November, the company agreed to acquire rural wireless carrier Midwest Wireless for $1.08 billion. Last month, the company said it would spin off its local phone assets and merge them with Valor Communications Group Inc. (VCG).
The deals already follow Alltel's merger with Western Wireless in August, as well as the acquisition of some Cingular Wireless assets.
"Strategically, 2005 was the busiest year we've ever had," said Chief Executive Scott Ford.
Alltel Chief Financial Officer Jeff Gardner, who will head the combined wireline business, said the company has started the separation process and is running the wireline business like a separate entity. As a result, Alltel will incur some redundant costs in the first half.
Alltel reported a 67% increase in data revenue to $2.58 per customer. Data revenue now represents of 5% of total average revenue. Executive Beebe said the company is looking to aggressively push higher capability phones and features such as MobiTV, which he said was working well.
Beebe said that the customer download activity in third-generation EV-DO phones are double that of non-EV-DO phones. Customers are taking advantage of the monitor quality and higher download speeds.
"That's very encouraging, and something that tells us we need to drive more DO phones into the marketplace, which we will do," he said.
The wireline business, which will be spun off later this year, added 154,000 broadband customers, but lost 124,000 access lines. Gardner, the CFO, said most of the lost lines came from concentrated markets.
Alltel launched its Echostar Communications Corp.'s (DISH) Dish Network service, which as gotten strong customer feedback. Gardner said he expects the service to increase Alltel's overall competitiveness.
"We're doing an excellent job of selling additional services into our customer base," he said.
Sherilyn Gasaway, who will serve as the new chief financial officer once Gardner leaves, said Alltel will provide more guidance on both the wireless and wireline businesses during the company's analyst meeting on Feb. 1.
For the past quarter, several one-time items weighed on Alltel's results, Gasaway said. Roughly $40 million was spent on the integration of Western Wireless and the purchased assets from Cingular. Other items included $10 million from repairs related to Hurricane Katrina, $7 million from the change in accounting practices, and $4 million related to discontinued operations from international businesses held for sale.
Gasaway added that the company saw higher costs related to advertising during the holiday season. The introduction of the trendy Motorola Inc. (MOT) RAZR mobile phone also required higher subsidies than normal, she said.
-By Roger Cheng, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com
(END) Dow Jones Newswires "
Posted to the site on 20th January 2006
Posted to: www.cellular-news.com/story/15694.php