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For Cingular, 2007 is about 3G

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.

11 Responses to “For Cingular, 2007 is about 3G”

  1. From my understanding Cingular is currently running HSDPA at 1.8 mbps, and is planning to up it’s speeds to 3.6 shortly. Also planned for 2007 is another bump up to 7.2, at which point would be faster than Rev. A.

    One thing to consider is the fact that they don’t have an express card. My suggestion even though I HATE them is to get the new Razr (v3xx), which runs at 3.6 even though the speed is not supported yet. Express cards are reported to be available the first quarter of 2007, which means we’d see them sometime in may…

    Many mac customers will find tethering a phone the only option to get high speed on their notebooks. I hope that Apple rethinks the launch of the iphone with an edge modem and throws in a 3.6 HSDPA modem upgradeable with firmware to 7.2 mbps. I tether now with my 8525, I can’t beat the fact that I can be on the phone and using the internet at the same time.

  2. When Cingular supports an HSDPA Express Card for either Windows or Mac, then I’ll get excited.

    Om, I would think you’d be scream at the lack of Express Card support for Mac on Cingular…

  3. I would suspect that, whether or not their #G network matures quickly enough, the iPhone will be adding, conservatively, one or a couple of million subscribers with higher ARPU.

    I think, with the Moto and Nokia results, we are seeing that carriers and phone manufacturers are hitting a wall in the U.S. — the only demand for high end services is coming from business. (And unlike the PC business where business means hundreds of millions of units, when it comes to high end, high speed services for phones, we are talking about 10 million units.)

    I think the iPhone really will lead a revolution in terms of growing the demand for higher end devices and services at the consumer level. Breaking through that wall will be a big advantage for Cingular.

  4. John Thacker

    “165 cities, including 73 of the top 100 markets1.” As of December the company had said “more than 160 markets, including most of the top 100 major cities in the country.”

    Yeah, it’s tricky to tell. They do have maps on their website. Comparing the maps with Verizon’s EV-DO maps, it looks like Cingular/AT&T has indeed rapidly expanded recently and is in most, though not all, of the markets that Verizon is in. OTOH, the area covered in each market and city seems to be smaller too. Verizon’s EV-DO in all the cities I checked seems to cover more area and more suburbs.

  5. Hmmm, the same day that it is mentioned that Cingular needs to realize a way to make up for sliding voice revenue, the Wall Street Journal runs a story on streaming video on a full size screen for cell phones (story on Microvision, symbol MVIS) on page B5 in January 25 WSJ. Lots of new revenue potential still out there from new services.

  6. HSDPA scam

    Cingular is throttling the HSDPA bandwidth pretty hard, so they can advertise HSDPA theoretical maximum speeds and charge you for it, but offer you slower than EVDO speeds. I think they do it for capacity reasons.

    They are totally evil. I did a broadband speed test in multiple cities with my HSDPA card and my Verizon EVDO PC card and the HSDPA PC card is consistently slower lower. Last week, I also got a Sprint REV A card (yes, I am a geek) and if you compare the much ballyhooed HSDPA to the Sprint REV A card, then it doesn’t stand a chance.

    Cingular’s idea of 3G is $40-50/month for 2.5G speeds. It is like their silly dropped call commercial. How can you drop a call unless you get a connection to begin with?

    I would like to see how long the Steve Jobs – Stan Sigman love affair lasts after the iPhone finally manages to lose its EDGE (2.5G) radio, gets an HSDPA radio and Jobs turns it on for the first time to do some of that fancy Safari browsing.

    God help the poor slob called the customer paying the carrier through his nose for 3G dreams.

  7. S R Raja

    According to 3g today, there seem to be 500 odd registered 3G services across the 3g networks in the world. Milking 3G Wireless suggests a large number of such applications getting milked – Do you actually get such indications with respect to Cingular Wireles ? I am not so sure… Perhaps you could substantiate…