For a company that is having a tough time sticking to its new name, the mobile division of AT&T, aka Cingular Wireless, knows one thing for sure: 2007 is all about milking 3G wireless.
Not that the company has an option. All you have to do is look at their latest quarterly report. The carrier counted 2.4 million net adds for the fourth quarter and announced that it had more than tripled is profits in its earnings report today.
Still, those new customers were made up of a mix of lower end prepaid and reseller additions, along with postpaid (746K prepaid, 750K reseller, and 861K postpaid, says UBS Investment Research.)
Sure they made Sprint feel lousy, but the fact of the matter is that this kind of growth is not going to be easy going forward. Cingular is already the largest mobile phone carrier in the US – 61 million. Its nearest rival is equally deep-pocketed Verizon Wireless, with 57 million subscribers at latest count.
The two companies will be fighting to steal customers from each other or weakened rivals such as Sprint, but these are budget customers, looking to get cheaper calling options. Which means that now more than ever Cingular needs to push its 3G plan this year, building out its network and bringing in more subscribers, if it wants to keep ARPU up, and Wall Street happy.
Cingular has been actively expanding its 3G network over the past months, and in its earnings report Cingular said it had spent $2.2 billion on capital expenditures in the fourth quarter, driven by the rollout of its 3G network. The company has spent $7.04 billion on overall capital expenditures for the year.
How is the 3G network growing? Hard to tell – in the earnings report Cingular says its customers can now access its 3G network in “165 cities, including 73 of the top 100 markets.” As of December the company had said “more than 160 markets, including most of the top 100 major cities in the country.” Markets? Cities? We guess the new figure is a little more but who knows with those explanations.
Chetan Sharma, an analyst who tracks the wireless data business closely says that by the end of the year Cingular should cover 90% of the major US markets and offer between 14-to-16 3G handsets. That’s the good news.
The bad news – Verizon and Sprint are thinking along the same lines and have undertaken a massive upgrade to their already widely available EVDO networks to Rev A, as the carrier with the most subscribers starts to make some 3G headway.
Most of the operators realize that the only way to make up for the sliding voice revenues is to offer services that need a high-speed data plan. Sharma predicts Cingular will start to get more competitive with some of the data services that Verizon and Sprint have been ahead on, but will still stay behind on broadcast video (MediaFLO), LBS deployment (for 3rd party application providers), VoIP, and Push-to-talk.
The company also just started offering a $200 mail in rebate for 3G handsets for customers willing to sign-up for a 2-year 3G contract and sign up for a fixed broadband product. In other words they are giving it away – hoping that they will come. If not, well, maybe it’ll be a year of 3-Geez for Cingular.