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U.S. Cellular Profits Spike, Tiered Data Coming

Mon, 08/08/2011 - 8:06am
Maisie Ramsay

U.S. Cellular saw its second-quarter profits rise 81 percent despite ongoing declines in its customer base, and said it would eventually introduce tiered data plans to address the rising mobile Internet use of its smartphone customers.

The Chicago-based regional operator, a subsidiary of parent company TDS, said its net income hit nearly $74 million in the second quarter, from $40.7 million last year. Sales rose 4 percent, to $1.07 billion.

The company lost 58,000 net retail customers, including 41,000 postpaid customers and 17,000 prepaid customers. U.S. Cellular's subscriber base now stands at 5.97 million customers, down from 6.14 million customers during the same period last year.

Smartphone customers helped buoy the operator's results and now comprise 23 percent of the company's postpaid subscribers. Smartphones accounted for nearly 40 percent of all devices sold by U.S. Cellular, from just 16 percent last year.

Postpaid ARPU increased to $51.84 from $50.55 last year, and postpaid churn also improved, lowering to 1.38 percent from 1.43 percent. 

U.S. Cellular's Belief Plans also gained traction, with 2.3 million customers signing up for the plans, which offer incentives to subscribers who stick with the operator.

However, the rising number of smartphones on its network has prompted the operator to look at ways of controlling data use.

Alan Ferber, U.S. Cellular's chief strategy officer, said the company would eventually come out with tiered data plans in response to the marked increase in its smartphone subscribers.

"We expect to introduce tiered data pricing sometime around the next two to three quarters," Ferber said in a conference call with analysts. "That will increase smartphone penetration as well as revenue and better cost controls."

Company President and CEO Mary Dillon also weighed in on the issue, saying that tiered plans could help offset the high cost of smartphone subsidies.

"We're actively working to make sure we have the right benefit of customer benefit and economics," Dillon said, stating that the company was "looking to manage getting paid for data usage."

U.S. Cellular's move toward tiered data pricing follows a similar shift from its Tier 1 competitors AT&T, Verizon Wireless and T-Mobile USA, all of which offer some combination of data caps and throttled speeds.

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