Western Wireless


plunged 45% Friday after the cellphone seller posted a steep first-quarter loss and said its subscriber base was eroding.

Shares in the Bellevue, Wash., company, which sells service to rural customers under the brand name CellularOne, dropped $2.37 to $3.31 at midday Friday. Western Wireless shares have lost 90% of their value over the last year amid worries about slowing growth and high costs. Wall Street firms downgraded the stock en masse, saying the company has yet to answer the most pressing questions about its business.

Most unsettling was the fact that the company lost some 17,000 subscribers, ending the latest quarter with 1.16 million. Subscriber loss ranks among wireless service providers' worst nightmares as subscriber growth begins to plateau. All the major U.S. providers are preparing to launch some form of high-speed wireless voice and data service to entice current consumers to spend more and new customers to join, but those costs must be paid by increases on the subscriber rolls.

"Following WWCA's 4Q 01 results, we said that we were looking for execution going forward," a Merrill Lynch note said. "1Q 02 results indicate that the company is still facing many challenges." Merrill Lynch slapped a rare sell rating on the stock, while Goldman Sachs cut the stock to market underperform and Morgan Stanley cut it to market perform, with an $8 price target. "The company's forward guidance shows little hope for near-term improvement," Morgan Stanley wrote.

Thursday evening, Western Wireless reported a first-quarter loss of $96 million, or $1.22 a share, compared with losses of $22.9 million, or 29 cents a share in the same period last year. The results include a noncash provision for income taxes of $78.9 million, due to changes in accounting rules adopted this year. Revenue jumped 23% from a year ago to $290.7 million.

Churn, the rate at which customers leave the service, increased to 2.6%. The average revenue per subscriber, a key metric in gauging a wireless provider's performance, dropped to $41.57. The company attributed the drop to members adopting more economical higher minute rate plans, with less over-the-limit charges.

Roaming revenues also were down due to new rates that went into effect in the third quarter of last year. The company said new roaming agreements with Cingular and Verizon Wireless should help drive more revenues as customers from other services roam in Western Wireless service areas.

Western Wireless' losses led a sectorwide decline in morning trading, with

AT&T Wireless


down 4.9% to $7.78,

Sprint PCS


down 7.7% to $10.67 and



down 1.8% to $4.89.

Triton PCS

(TPC) - Get Report

was also dragged down 2.56% to $9.50, despite reporting positive first-quarter results, which helped boost its stock on Thursday.