US mobile resurgence led by AT&T Wireless’ eight-fold jump in profits

The US’ third-largest mobile operator AT&T Wireless [NYSE: AWE] reported a massive eight-fold year-on-year increase in second-quarter profit, spurred by strong subscriber growth and improved margins. The carrier, which was spun off from communications giant AT&T in 2001, added 446,000 subscribers in the three months to 30 June 2003, some 100,000 more than Wall Street had predicted, to take its total customer base to 21.4 million. The surge in growth, coupled with a 200 basis point reduction in churn to 2.2% and a tighter reign on expenses, helped boost net profits to USD228 million, a considerable increase on the USD24 million posted twelve months earlier. The results confounded analysts expectations, bringing stakeholders double the predicted four cents per share. The cellco is continuing to work on improving its margins and announced earlier this month that it intends to shed around three percent of its workforce, or 1,000 jobs, this year, following the 2,000 redundancies made last year.

AT&T Wireless also reported significant progress in the build-out of North America’s first wideband CDMA network (WCDMA), which it is undertaking as a joint venture with Japan’s NTT DoCoMo. The two operators announced that agreements have been inked with Nortel Networks and Ericsson for equipment and support for the project. The WCDMA network is expected to launch before the end of 2004 in four US regions.

AT&T Wireless’ performance was part of a second-quarter resurgence by US cellcos, whose prospects had previously been written off amid analyst claims that growth in the country’s mobile sector was stalling having barely reached 50% penetration. The performance is partly attributable to the manner in which carriers have been aggressively touting their wares in an attempt to sign up as many new customers as possible before November’s deadline for the introduction of mobile number portability.

Integrated telecoms provider BellSouth [NYSE: BLS] received a lift from its own wireless business, which helped offset fixed-line declines to boost its second-quarter profits above analyst’s expectations. Net profit for the period was USD951 million, up from USD263 million the year before, despite a 2% fall in consolidated revenues to USD7.1 billion. This figure would have been far less were it not for the performance of its 40%-held subsidiary Cingular Wireless, which added 540,000 subscribers in the quarter and lowered its churn to 2.5%. However, strong performances by BellSouth’s broadband and long-distance telephony businesses, adding 103,000 and 856,000 customers respectively, were offset by a 4% decline in customers using its core local phone services.