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U.S. Cellular Warns of 4Q Customer Losses, Sales Slump

Posted In: Business | US Cellular | FirstNews

By Maisie Ramsay Thursday, February 3, 2011

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U.S. Cellular warned investors of customer losses and lower-than-expected sales in preliminary fourth-quarter and full-year results published today.

The carrier, a subsidiary of TDS, lost 10,000 postpaid customers and 11,000 prepaid customers in the fourth quarter and said full-year sales would come in "just slightly below" its previous guidance of $3.925 billion. U.S. Cellular said its full-year operating income is also expected to come in below its earlier forecast, dropping about 5 percent below its guidance of $200 million to $250 million.

U.S. Cellular blamed the results on the cost of its Belief Project, which offers customers replacement phones, faster upgrades, cheaper plans and discounts for paying online. The program also included a week long sale at the end of November that offered customers a $150 credit for activating a new smartphone. The company said nearly 1.2 million new and existing customer adopted its Belief Project plans after the program launched in October 2010, but the program failed to stop the company from losing customers.

Stifel Nicolaus analyst Chris King said U.S. Cellular's customer losses pointed to "the continued challenges that the company faces as a regional wireless provider... challenges that may become more acute following this week's launch of the iPhone by Verizon Wireless – U.S. Cellular's most direct competitor."

King had expected U.S. Cellular to add about 31,000 new postpaid subscribers and lose about 29,000 prepaid subscribers in the fourth quarter, for a combined addition of 2,000 new customers.

The grim preliminary earnings did have a few bright spots. Postpaid churn and ARPU improved both sequentially and year-over-year, and smartphone sales exceeded expectations. During the fourth quarter, smartphones comprised 39 percent of all handset sales, with Android leading the increase. Smartphone subsidies ate into profits, but U.S. Cellular said the higher ARPU associated with the devices would be beneficial in the long term. U.S. Cellular will release its complete earnings results on Feb. 24.

U.S. Cellular's stock fell 1.6 percent by 9:45 a.m. Central in trading on the New York Stock Exchange.

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3 Comments

Mnate 4/8/2011 12:55:28 PM

I would like to add that I also used to work for U.S. Cellular. I left the company because of relocating. I am going to disagree with the previous disgruntle employee. I honestly believe U.S. Cellular® is a great company to work for. I now work for a competitor and I can honestly say they do not care about their customers the way that U.S. Cellular® does. U.S. Cellular® is constantly training and revamping to fit customers needs. They put all their focus on their customers and how to make a better experience. That is a very smart company and they know their stuff. A little bump in the road is not going to stop them, they will bounce back. Do your research. They did beat all the big carriers and get best in customer satisfaction and best value in wireless for a reason. I even saw U.S. Cellular® as the top 10 companies in the country to do business with and who do their customers right. There were no other cell phone companies who made the list. How can you say that they are SAD? Makes no sense.
Gaijin 2/11/2011 12:12:31 AM

I used to work for US Cellular in Greenville NC. Let me tell you the writing is on the wall, this company is a sinking ship. After the CEO retired in March 2010 you received emails 2-3 times a week that higher ups were leaving the company. (US Cellular based out of Chicago). Glad I got out of there, the company is going down and they are running out the good employees. All that is left is the cheerleaders. Put it this way you were banking your 4th quarter on 2000 customers.....just 2000?! Wow, they are sad
Andayette 2/6/2011 1:48:39 AM

I'm shocked that the 2000 additions are attributed to post paid clients. I had just thought people had caught onto the idea the pre paid is the only responsible way of controlling a phone bill. Mayb the loss of pre paid customers can be attributed to them switching to a better and cheaper no-contract plan that tracfone offers, and not in fact a defection from pre pay.