Sept. 11 Didn't Bring Wireless Surge After All
File the story about wireless-phone subscriber surge after Sept. 11 with the other urban legends.
As Americans listened to accounts of stricken New Yorkers and Washingtonians calling home on their mobile phones, financial pundits grabbed hold of a potential mini-boom in handset sales. Whatever rush there was on mobile coverage proved to be brief and scattered enough that it didn't add up to a gangbuster third quarter for the wireless sector. Carriers turned in the performance the Street had been expecting since July forecasts were made.
Sprint PCS (PCS) was the first mobile carrier to report, and it scored whopping customer additions of 1.2 million, compared with estimates in the 800,000 range. That encouraging finish was followed by AT&T Wireless' (AWE) Street-meeting 748,000 new faces and so-so results for Verizon Wireless (VZ), which turned in 752,000 subscribers.
Nextel (NXTL) turned in the 480,000 additions it had promised for the quarter, after briefly upping its forecast before Sept. 11 and then reducing it. While Cingular's overall number grew 95,000, its numbers weren't as impressive as its competitors' because it made considerable efforts to weed out unprofitable, low-end subscribers. All in all, a strong quarter for wireless carriers, but one driven by the advancing symptoms of market maturation, not a one-time event."Maybe some more people are buying phones for security reasons, but on the flipside the economy is getting worse," posited Peter Friedland of WR Hambrecht, who categorized the hopes for a third-quarter rush as "media hype," given that there were only three weeks left in the quarter on Sept. 11. He said a mild event-driven increase in wireless demand might be at work, however, in the industry's ability to keep up with expectations. "People don't want to spend in general, so maybe it helped offset the economic effects." On the whole, carriers were nagged by the same trends that have troubled them in the past few quarters. They can add lots of customers, but at a price. About 45% of the U.S. population has a mobile-phone plan, which means that to maintain a rapidly increasing base of users, carriers have got to reach for consumers who might have less than sparkling credit. Those users tend to pay less each month for calls and are more likely to drop their plans, hurting carriers' average revenue per user and increasing churn.
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