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U.S. Cellular Loses Customers, Profits Stable

Thu, 02/24/2011 - 7:13am
Maisie Ramsay

U.S. Cellular told investors earlier this month that it was losing prepaid and postpaid customers, and the warning was borne out in its fourth-quarter earnings today.

The company lost 31,000 customers in the fourth quarter, including the defection of 10,000 postpaid customers and 11,000 prepaid subscribers. By the end of 2010, U.S. Cellular had 6.07 million customers, down slightly from the 6.14 million customers it had at the end of 2009.

Despite the decline in its customer base, U.S. Cellular managed to eke out a slight increase in profits, which edged up 3 percent in the fourth quarter to $6.8 million on sales of $1.06 billion, which were relatively flat over last year. For the full year 2010, the company's profits dipped to $132.3 million on sales of $4.17 billion, from a 2009 profit of $206.7 million on sales of $4.2 billion.

Retail ARPU rose slightly to $47.41 in the fourth quarter, from $47.07 during the same period last year, and churn improved to 1.5 percent from 1.6 percent last year.

The company's earnings are viewed as something of a test for U.S. Cellular's Belief Plans, which launched at the beginning of the fourth quarter. Nearly 1.2 million customers signed up for U.S. Cellular's Belief Plans during the quarter.

"U.S. Cellular had many significant accomplishments during the fourth quarter, but our financial performance was impacted by strong competitive pressures and the actions we took to protect our customer base, as well as spending on our enablement initiatives," said Mary Dillon, U.S. Cellular president and CEO, in a statement.

The company says nearly 17 percent of its retail customers use smartphones, and almost 40 percent of the devices it sold during the fourth quarter were smartphones.

Looking ahead, U.S. Cellular said sales should remain relatively flat over the next year. The company expects service revenue to come in between $4 billion and $4.1 billion in 2011, from $3.9 billion in 2010. The company's forecast on operating income was more optimistic with a range of $185 million to $285 million forecast for 2011, from $195.4 million in 2010.

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