US Carriers, Industry In General Looking Strong
By Carlo Longino, Wed Jul 21 21:00:00 GMT 2004

Updated: Three American carriers report solid second quarters while AT&T Wireless continues to lag the market, but the mobile market looks to be rolling worldwide.

Nextel and Sprint both reported significant increases in their revenues and profits as both added more than 500,000 new subscribers during the second quarter. Nextel's ARPU continues to outpace its rivals at $70, with Sprint's steady at $62, though the carrier says 7% of that comes from data.

Sprint also added another 390,000 users through its affiliates and wholesalers, with the vast majority of those adds from Virgin Mobile, which given previous updates must be nearing or above 2 million users. Boost, Nextel's youth-focused brand, added 68,000 of the carrier's total users, now up to 608,000 total.

It's hard to say for certain that Nextel and Sprint's gains came mainly from new subscribers rather than users switching from other carriers, but that is the likely scenario. One carrier having a hard time hanging on to and attracting subscribers, however, is AT&T Wireless, which added a net of only 15,000 in the quarter. Its total revenues inched up, and its service revenues actually declined for the first time in company history. Churn fell, but remains high at 3.4%, and ARPU was up over the first quarter, but down from last year to $58.80.

AT&T Wireless' weak showing comes just a few months before the expected close of Cingular's $41 billion buyout, and along with the murky situation around its 3G launch earlier this week, will only add to the growing scuttlebutt that the acquisition may be crumbling.

The wireless market looks strong all over, regardless of sector or geography, though, as European carrier mmO2, equipment vendors Lucent and Ericsson and CDMA stalwart Qualcomm also reported favorable second-quarter earnings. mmO2 increased its overall subscriber count by almost 3 percent and grew ARPUs in the UK and Germany. The carrier also increased its outlook for the rest of the year.

Gear makers Lucent and Ericsson have certainly turned things around from a few years ago, when both were struggling: Lucent reversed last year's second-quarter loss and posted its fourth straight quarterly profit, helped by a 58% increase in demand for its wireless products. Ericsson reported its third consecutive profitable quarter, also reversing last year's loss on an 18% increase in sales and the benefits of a deep cost-cutting program. The company said sales of network equipment were up 28% in the quarter, the first increase in three years.

The continued strong demand for devices that is boosting handset vendors is also helping Qualcomm, which more than doubled its fiscal third-quarter profits. The company is benefiting both from sales of chips for CDMA devices, but also from its wide portfolio of CDMA-related intellectual property.

Update: Cingular added a net of 428,000 subscrubers in the quarter as revenue increased 7.3 percent from last year's second quarter to $4.2 billion. Profits, however, dropped about 10% to $680 million, while ARPU was down 5.3% from a year ago to $50.32, though that's up from the first quarter as Cingular says test messaging and content downloads are growing in popularity.