Cingular Wireless Reports Fourth-Quarter And Full Year Results, Launches Network Expansion And Customer Service Initiatives
Atlanta, Georgia, January 21, 2004
Cingular Wireless LLC, the United States' second largest wireless company, today reported fourth-quarter results that include continued strong subscriber growth and additional progress in its nationwide GSM/GPRS network overlay.
For the three months ended December 31, 2003, Cingular, a joint venture between SBC Communications (NYSE: SBC) and BellSouth Corporation (NYSE: BLS), achieved net subscriber additions of 642,000, bringing its nationwide cellular/PCS customer base to over 24 million. Gross adds in the fourth quarter totaled 2.6 million, the second highest quarter in Cingular's history - bested only by third-quarter 2003's 2.7 million. Churn was 2.8 percent, in line with third-quarter 2003 results. Porting requests under wireless local number portability rules implemented in November were below expectations and not a significant factor in the quarter's results.
For the full year 2003, Cingular Wireless added 2.1 million subscribers, the strongest annual net add total in the company's history.
Cingular has achieved this subscriber growth while executing a nationwide network overlay of a next generation GSM/GPRS technology. As of Dec. 31, Cingular's GSM/GPRS network was available to 93 percent of the company's operational POPs, up from approximately 66 percent six months earlier and 81 percent at the end of the third quarter. Cingular continues to run ahead of its original schedule for GSM/GPRS deployment and expects to achieve 100 percent coverage of its network in 2004. Additionally, the vast majority of the new networks are already performing at or exceeding strict quality standards and bringing our GSM customers the truest voice quality of any wireless company.
Customer response to GSM/GPRS continues to be strong as 57% of Cingular's total minutes are now carried on the GSM network. GSM is the world's most popular wireless technology, with more than 900 million subscribers in 200 countries. It provides customers the widest selection of handsets in the industry with features like color screens and built-in cameras and the latest data services, including multi-media messaging and high speed packet data. For example, Cingular currently offers 14 handsets from 6 different vendors, all of which either have built-in cameras or camera attachments for use with multi-media messaging. At year's end, more than 45 percent of Cingular's handsets in service were GSM capable, up from 27 percent at the end of the second quarter of 2003 and 35 percent at the end of the third quarter.
In 2003, Cingular led the industry in total data revenue, increasing almost 60% over 2002, driven by an 85% increase in short messaging service (SMS) volumes combined with continued strength in its proprietary Mobitex data-only network that served 789,000 subscribers at the end of the year. During 2003, Cingular successfully launched a host of new data applications like instant messaging and multi-media messaging that will continue to drive data revenue growth into 2004.
"Cingular took huge steps forward in 2003," said Stan Sigman, President and CEO of Cingular Wireless, "and I am very proud of how well Cingular's talented employees executed over the past year. We accelerated subscriber growth. We moved our nationwide network conversion forward ahead of schedule, delighting customers with the quality of GSM. And we delivered a host of innovations through new data services and products that integrate wireless and wireline communications."
"Now, our clear goal is to move Cingular to the next level," Sigman continued, "and build an even stronger foundation for sustained growth. The keys are outstanding network performance and a world-class customer experience. To achieve these goals, we have launched two major initiatives. The first is a nationwide drive to improve coverage and network quality. We started this initiative in the fourth quarter by adding more than 750 cell sites, and it will continue through 2004. This program builds on the progress we've made with GSM/GPRS and the moves we've made to add spectrum. The second initiative, which also has already begun, is a comprehensive enhancement of our customer service systems and procedures. While these projects pressure margins in the near term, they will strengthen our growth prospects long term. I am very confident in our ability to deliver on these initiatives, and I am excited about what Cingular can accomplish in 2004."
Cingular's fourth-quarter financial results were shaped by continued strong subscriber growth and by aggressive execution in terms of network overlay, customer retention programs and new network expansion and customer service initiatives.
Fourth-quarter revenues grew to $3.9 billion, up 5.6 percent compared with the year-ago fourth quarter.
Cellular/PCS data revenue increased 85 percent year-over-year, largely due to rising popularity of SMS (short messaging service), as well as downloadable ringtones and photo messaging. Cingular delivered over 1 billion SMS messages during the quarter.
Cellular/PCS ARPU (average revenue per user), which represents the service revenue per subscriber, was $49.03, down $2.81 from fourth quarter of last year.
Total operating expenses were $3.6 billion in the fourth quarter, up 12.4 percent from $3.2 billion in the year-ago period. Expenses were driven by significantly higher gross customer additions, extensive customer retention programs, increased advertising and costs associated with launching wireless local number portability.
Operating income was $329 million for the quarter, compared with $516 million for the same quarter a year ago. In the fourth quarter, to be consistent with emerging industry practices, Cingular's income statement presentation was changed for the current and prior year periods to reflect, as revenues, billings to our customers for the Universal Service Fund (USF) and other regulatory fees and to reflect, as expenses, the costs related to payments into the associated regulatory funds. The impact of this change on fourth quarter revenues and expenses was $96 million. These revenues and expenses for the same quarter a year ago were $47 million. Operating income and net income for all periods have been unaffected.
Enhanced Spectrum Position
As it has deployed its GSM/GPRS network, Cingular has also made strategic moves to enable access to new markets and to improve its spectrum position in existing markets. These initiatives will enable Cingular to expand its network, increase capacity and lower roaming costs.
In December, Cingular closed its transaction with Sunshine PCS purchasing additional spectrum in the Florida markets of Tallahassee, Panama City, and Ocala.
Cingular agreed to purchase wireless licenses from NextWave Telecom Inc. for $1.4 billion. These licenses cover approximately 83 million POPs in 34 markets. The transaction requires FCC approval, and Cingular expects the transaction to close in the first half of 2004.
In September, Cingular agreed to acquire additional PCS spectrum and operations in Texas, Arkansas, and Louisiana and cellular operations in Louisiana through an agreement with US Unwired Inc. This transaction is expected to close in the first quarter of 2004.
In October, Cingular announced an agreement with Dobson Communications to exchange Dobson's ownership in its Eastern Shore of Maryland cellular property for Cingular's ownership in its Northwest Michigan cellular property. This transaction is also expected to close in the first quarter of 2004.
Wireless Data Initiatives
Cingular and its parent companies SBC Communications (NYSE: SBC) and BellSouth Corporation (NYSE: BLS) continue to exploit the opportunities and benefits of wireless and wireline integration.
10% of Cingular's gross postpaid customer additions for the quarter were from the parents' sales channels. These channels contributed over 875,000 wireless customers during 2003.
In October Cingular introduced FastForwardTM - the first device that marries the convenience of wireless service with your home or office. The patented device - designed as a cradle to hold a wireless phone - simply plugs into an electrical outlet. When the Cingular Wireless phone is "cradled", calls to the wireless phone are forwarded to a designated landline phone, while the wireless phone's battery is automatically re-charged.
ABOUT CINGULAR WIRELESS>
Cingular Wireless, a joint venture between SBC Communications (NYSE - SBC) and BellSouth (NYSE - BLS), serves more than 24 million voice and data customers across the United States. A leader in mobile voice and data communications, Cingular is the only U.S. wireless carrier to offer RolloverSM, the wireless plan that lets customers keep their unused monthly minutes. Cingular has launched the world's first commercial deployment of wireless services using Enhanced Datarate for GSM Evolution (EDGE) technology. Cingular provides cellular/PCS service in 43 of the top 50 markets nationwide, and provides corporate e-mail and other advanced data services through its GPRS, EDGE and Mobitex packet data networks. Details of the company are available at www.cingular.com.
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BellSouth's fourth quarter earnings conference call, during which Cingular's earnings results will be discussed, will be held at 10 a.m. Eastern time on January 22, 2004 at www.bellsouth.com/investor/.
SBC will host its fourth quarter earnings conference call, during which Cingular's earnings results will be discussed, on Jan. 27, 2004. It will be broadcast live via the Internet at 10 a.m. Eastern time at www.sbc.com/investor_relations.
Forward-looking Information: In addition to historical information, this document and the conference calls referred to above may contain forward-looking statements regarding events and financial trends. Factors that could affect future results and could cause actual results to differ materially from those expressed or implied in the forward-looking statements include:
Such forward-looking information is given as of this date only, and Cingular assumes no duty to update this information.