Cingular Wireless Reports Second-Quarter Results: Solid Customer
and Revenue Growth, Improved Margins, Rapid Progress in Major
Network Initiatives * Second-quarter net adds total 428,000 to
reach 25 million cellular/PCS subscribers in service * Retail
postpaid net adds increase 29 percent over first-quarter's gain *
Revenue up 7.3 percent to $4.2 billion; cellular/PCS data revenue
up 110 percent over the same quarter of 2003 * Operating margin up
220 basis points from first quarter levels * 100 percent nationwide
GSM/GPRS network coverage achieved in June, six months ahead of
original schedule * Announced UMTS 3G trial with commercial
deployment targeted for 2005 * Major agreements announced to expand
network coverage and to place Cingular Wireless in all 100 of
nation's top 100 metropolitan areas following completion of
AT&T Wireless acquisition ATLANTA, July 21
/PRNewswire-FirstCall/ -- Cingular Wireless LLC, one of the United
States' leading wireless providers and a joint venture between SBC
Communications (NYSE:SBC) and BellSouth Corporation (NYSE:BLS),
today reported second-quarter 2004 results that included solid
revenue growth, improved margins and a significant upturn in higher
quality retail postpaid subscriber growth. For the three months
ended June 30, 2004, Cingular's net subscriber additions totaled
428,000, bringing its nationwide cellular/PCS customer base to 25
million, an increase of 2.4 million customers over the past four
quarters. Subscriber growth was driven by retail postpaid net adds,
which were up 29 percent from first-quarter levels and represented
nearly 90 percent of total net adds in the quarter. Gross customer
additions escalated month to month, totaling a strong 2.4 million
for the quarter, continuing Cingular's recent robust gross add
trend. Average monthly subscriber churn was 2.7 percent, which
remained flat sequentially but increased 20 basis points from the
second quarter of 2003. Wireless local number portability, which
was fully implemented across the country during the quarter, had
minimal impact on Cingular's subscriber results. In addition to
solid subscriber growth, Cingular completed its nationwide network
overlay of next-generation GSM/GPRS technology, six months ahead of
its original schedule. GSM, the world's most widely used wireless
technology, delivers the truest voice quality in wireless. GSM also
provides a strong foundation for deployment of advanced wireless
data services, and it offers customers the widest selection of
handsets in the industry with features such as color screens,
built-in cameras and the latest data services. "Cingular has kept
its focus, and we continue to execute well, delivering on our
commitments," said Stan Sigman, President and CEO of Cingular
Wireless. "In the second quarter, we achieved solid subscriber
growth, with a substantial upturn in retail postpaid net adds. Our
margins continued to improve. And thanks to the outstanding work of
our employees, we beat our target date for implementing our
GSM/GPRS network overlay, completing it six months ahead of our
original schedule. "I am particularly encouraged by the progress
we've made moving to the next generation of advanced network
capabilities," Sigman said. "We are on track to substantially
complete our nationwide EDGE high-speed data technology deployment
by the end of the third quarter. And we are excited about our
current 3G UMTS trial and deployment targeted for 2005. These
technologies will deliver to customers a host of new services and
applications, and enabled by the expanded coverage and additional
spectrum provided by our planned acquisition of AT&T Wireless,
they hold enormous potential. "Growth and stability in wireless
come from an intense focus on the fundamentals," Sigman said.
"Those are network coverage and quality combined with world-class
customer care. We're making very good progress in these key areas,
and we look to the future with confidence and enthusiasm."
Financial Results Cingular's second-quarter financial results were
shaped by solid subscriber growth and rigorous expense management:
-- Second-quarter revenue grew to $4.2 billion, up 7.3 percent
compared with $3.9 billion in the year-earlier second quarter.
Service revenue increased 5.0 percent to $3.8 billion. --
Cellular/PCS data revenue increased over 110 percent
year-over-year, largely due to the rising popularity of text
messaging, mobile instant messaging, mobile email, downloadable
ringtones, games and photo messaging. Cingular delivered more than
1.4 billion text messages during the quarter, up 70 percent from
the second quarter of 2003. -- In part due to increased data
revenue in the second quarter, Cingular saw stabilizing trends in
cellular/PCS ARPU (average revenue per user). Cingular ARPU, which
represents service revenue per subscriber, was $50.32, down 5.3
percent from year-earlier second quarter but up 4.9 percent versus
the first quarter of 2004. -- Total operating expenses were $3.5
billion, up 11.4 percent from $3.1 billion in the year-ago period
and up 2.7 percent versus $3.4 billion in the first quarter of
2004. -- Cingular's second-quarter operating margin was 16.4
percent. Although down 310 basis points versus the year-earlier
quarter, operating margin increased 220 basis points from the first
quarter of this year. (Operating margin is the percentage of
operating income to operating revenue) -- Second-quarter operating
income was $680 million, down 10.1 percent compared with $756
million in second quarter of 2003 but up 22 percent compared to the
$559 million in the first quarter of 2004. Agreement To Acquire
AT&T Wireless and Follow-Up Agreements To improve its ability
to serve customers and support high-speed data services, in
February of this year, Cingular Wireless announced an agreement to
acquire AT&T Wireless. The proposed transaction is currently
under review by the U.S. Department of Justice and the Federal
Communications Commission. Cingular expects the transaction to
close before year-end. "AT&T Wireless' improved second quarter
results issued this morning reflect the recovery actions taken over
the last six months, and are consistent with our expectations for
the quarter," Sigman said. During the past three months, Cingular
has reached two agreements to prepare for operations after the
AT&T Wireless transaction closes. Both transactions are
contingent on Cingular's acquisition of AT&T Wireless. -- In
May, Cingular Wireless announced it would end its network
infrastructure joint venture with T-Mobile USA in New York City,
California and Nevada, with Cingular selling its California and
Nevada network and certain California and Nevada spectrum to
T-Mobile USA for approximately $2.5 billion. Cingular and T-Mobile
customers will be unaffected by the proposed transaction, with both
companies retaining their respective customers. Combined with the
network and spectrum to be obtained through its acquisition of
AT&T Wireless, this transaction will result in improved
spectrum positions for Cingular in the New York City metropolitan
area and California/Nevada markets. -- On July 8, Cingular,
AT&T Wireless and Triton PCS announced a definitive agreement
to terminate AT&T Wireless' equity interest in Triton PCS. In
addition, the parties signed a non-binding letter of intent
providing for the acquisition by Cingular of wireless properties in
Virginia in exchange for wireless properties in North Carolina and
Puerto Rico. This would expand Cingular's coverage to all 100 of
the top 100 metropolitan markets in the United States. Network and
Service Initiatives In addition to preparing for the completion of
the AT&T Wireless acquisition, Cingular made significant
progress in the second quarter on key technology, product and
service innovations. -- To give customers faster data speeds and
more options in data services, Cingular has accelerated its
deployment of EDGE (Enhanced Data rates for GSM Evolution)
high-speed data technology. At the end of the second quarter, the
company had covered two-thirds of its network and expects to have
substantially all of its markets enabled by the end of the third
quarter. Cingular was the first carrier in the world to launch EDGE
when it activated EDGE service in Indianapolis in July 2003. EDGE
allows for data rates up to 170 Kbps with average speeds ranging
between 90-135 Kbps. -- In May, Cingular announced plans for a
third-generation (3G) UMTS (Universal Mobile Telecommunications
System) network trial to be deployed in the Atlanta market this
summer. The trial will allow Cingular to evaluate mobile voice,
high-speed data and multimedia services. It will include testing of
High Speed Downlink Packet Access (HSDPA), a technology that will
ultimately support peak data speeds of up to 14.4 Megabits per
second (Mbps). The network also will be designed to support voice
over Internet protocol (VoIP) services in the future. In addition
to consumer applications, the trial will allow Cingular to
demonstrate technology that will enable businesses to provide their
employees -- such as field service and sales personnel -- with
high-speed mobile access to their corporate networks and the
business applications they normally use in the office. Cingular is
targeting its initial deployment of UMTS service for 2005. A
broader nationwide UMTS rollout is dependent upon adequate spectrum
being available from the AT&T Wireless acquisition. --
Throughout the quarter, Cingular Wireless implemented a major
customer service initiative designed to provide customers with a
clear, personalized summary of their service plan within minutes of
signing up for service. Called "The Cingular Service Summary," the
document gives new customers easy-to-understand information about
their service plan, a simulated first bill with expected charges,
an example of an ongoing bill, color-coded coverage maps specific
to their calling plan, and other details about the terms of
service. The service began rolling out in early April and is
expected to be available in all company-owned stores and exclusive
agent locations later this summer. About Cingular Wireless Cingular
Wireless, a joint venture between SBC Communications (NYSE:SBC) and
BellSouth (NYSE:BLS), serves more than 25 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 Rollover(SM), the wireless plan that lets customers keep
their unused monthly minutes. Cingular is the largest provider of
GSM services in the United States, and has a 100 percent digital
GSM/GPRS footprint across its service area. It also launched the
world's first commercial deployment of wireless services using
Enhanced Data rates for GSM Evolution (EDGE) technology. Cingular
also 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 http://www.cingular.com/ . Get
Cingular Wireless press releases e-mailed to you automatically.
Sign up at http://www.cingular.com/newsroom . Conference Calls SBC
will host its second quarter earnings conference call, during which
Cingular's earnings results will be discussed, on July 22, 2004. It
will be broadcast live via the Internet at 10 a.m. Eastern time at
http://www.sbc.com/investor_relations . BellSouth's second quarter
earnings conference call, during which Cingular's earnings results
will be discussed, will be held at 10 a.m. Eastern time on July 26,
2004 and can be accessed at http://www.bellsouth.com/investor/ .
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: -- the pervasive and
intensifying competition in all markets where we operate; -- delay
in closing the acquisition of AT&T Wireless; -- failure to
quickly realize capital and expense synergies from the acquisition
of AT&T Wireless as a result of technical, logistical,
regulatory and other factors; -- problems associated with the
transition of our network to higher speed technologies; -- slow
growth of our data services due to lack of popular applications,
terminal equipment, advanced technology and other factors; --
sluggish economic and employment conditions in the markets we
serve; -- the final outcome of FCC proceedings, including
rulemakings, and judicial review, if any, of such proceedings; --
enactment of additional state and federal laws, regulations and
requirements pertaining to our operations; and -- The outcome of
pending or threatened complaints and litigation. Such
forward-looking information is given as of this date only, and
Cingular assumes no duty to update this information. Cingular
Wireless LLC Income Statement - amounts in millions (unaudited)
Quarter Ended Year to Date 06/30/ 06/30/ 06/30/ 06/30/ 2004 2003 %
Change 2004 2003 % Change Operating revenues: Service revenues
$3,801 $3,619 5.0% $7,359 $7,013 4.9% Equipment sales 354 255 38.8%
738 499 47.9% Total operating revenues 4,155 3,874 7.3% 8,097 7,512
7.8% Operating expenses: Cost of services 943 890 6.0% 1,865 1,711
9.0% Cost of equipment sales 505 451 12.0% 1,042 847 23.0% Selling,
general and administrative 1,462 1,269 15.2% 2,834 2,486 14.0%
Depreciation and amortization 565 508 11.2% 1,117 996 12.1% Total
operating expenses 3,475 3,118 11.4% 6,858 6,040 13.5% Operating
income 680 756 (10.1%) 1,239 1,472 (15.8%) Interest expense 199 230
(13.5%) 397 455 (12.7%) Minority interest expense 41 35 17.1% 68 59
15.3% Equity in net income (loss) of affiliates (92) (76) 21.1%
(197) (148) 33.1% Other income (expense), net 1 7 (85.7%) 5 33
(84.8%) Income before income tax and cumulative effect of acctng.
chg. 349 422 (17.3%) 582 843 (31.0%) Provision for income taxes (2)
12 (116.7%) 4 14 (71.4%) Income before cumulative effect of
accounting change 351 410 (14.4%) 578 829 (30.3%) Selected
Financial and Operating Data for Cingular Wireless - amounts in
millions, except customer data in 000s Quarter Ended Year to Date
06/30/ 06/30/ 06/30/ 06/30/ 2004 2003 % Change 2004 2003 % Change
(Amounts in millions, except customer data in 000s) Total
Cellular/PCS Customers(1) 25,044 22,640 10.6% 25,044 22,640 10.6%
Net Customer Additions - Cellular/PCS 428 540 (20.7%) 982 729 34.7%
M&A Activity, Partitioned Customers and/or Other Adjs. (2) (14)
35 (14) Churn - Cellular/PCS(2) 2.7% 2.5% +20BP 2.7% 2.6% +10BP
ARPU - Cellular/PCS(3) $50.32 $53.12 (5.3%) $49.15 $51.95 (5.4%)
Minutes Of Use Per Cellular/PCS Subscriber 523 445 17.5% 505 425
18.8% Licensed POPs - Cellular/PCS(4) 243 236 243 236 Penetration -
Cellular/PCS(5) 11.1% 10.2% 11.1% 10.2% Total Cingular Interactive
Customers 735 788 (6.7%) 735 788 (6.7%) Net Customer Additions -
Cingular Interactive (33) (47) (29.8%) (54) (29) 86.2% In an effort
to be consistent with emerging industry practices, the income
statement for all periods presented reflects billings to our
customers for the Universal Service Fund (USF) and other regulatory
fees as "Service revenues" and the related payments into the
associated regulatory funds as "Cost of services" expenses.
Operating income and net income for all periods have been
unaffected. Notes: (1) Cellular/PCS subscribers include customers
served through reseller agreements. (2) Cellular/PCS subscriber
churn is calculated by dividing the aggregate number of
cellular/PCS subscribers who cancel service during each month in a
period by the total number of cellular/PCS subscribers at the
beginning of each month in that period. (3) ARPU is defined as
cellular/PCS service revenues during the period divided by average
cellular/PCS subscribers during the period. (4) Licensed POPs
refers to the number of people residing in areas where we and our
partners, Salmon and T-Mobile USA, Inc., have licenses to provide
cellular or PCS service, including the New York City metropolitan
area, and in areas where we have not yet commenced service, such as
the Salt Lake City area. (5) Penetration calculation for 2Q04 is
based on licensed "operational" POP's of 226 million. Cingular
Wireless LLC Balance Sheet - amounts in millions (unaudited)
06/30/2004 12/31/2003 Incr(Decr) % +/- (audited) Assets Current
assets: Cash and cash equivalents 101 1,139 (1,038) -91.1% Accounts
receivable - net of allowances for uncollectibles 1,711 1,592 119
7.5% Inventory 209 273 (64) -23.4% Prepaid expenses and other
current assets 424 296 128 43.2% Total current assets 2,445 3,300
(855) -25.9% Property, plant and equipment - net 11,019 10,939 80
0.7% Intangible assets - net 10,140 8,773 1,367 15.6% Other assets
2,449 2,514 (65) -2.6% Total assets 26,053 25,526 527 2.1%
Liabilities and members' capital Current liabilities: Debt maturing
within one year 325 95 230 242.1% Accounts payable and accrued
liabilities 2,764 3,092 (328) -10.6% Total current liabilities
3,089 3,187 (98) -3.1% Long-term debt to affiliates 9,678 9,678 -
0.0% Long-term debt to external parties 2,913 2,914 (1) 0.0% Total
long-term debt 12,591 12,592 (1) 0.0% Other noncurrent liabilities
650 604 46 7.6% Minority interests in consolidated entities 660 659
1 0.2% Members' capital 9,063 8,484 579 6.8% Total liabilities and
members' capital 26,053 25,526 527 2.1% DATASOURCE: Cingular
Wireless CONTACT: Investor Relations, Kent Evans, +1-404-236-6203,
or , or Jeff Cannon, +1-404-236-5486, or ; or Media Relations, Clay
Owen, +1-404-236-6153, or wireless, +1-404-538-0124, or , all of
Cingular Wireless Web site: http://www.cingular.com/
http://www.cingular.com/newsroom
http://www.sbc.com/investor_relations
http://www.bellsouth.com/investor
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