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Technology Business Research Ranks Cingular Wireless No. 1 in 1Q02 Benchmark Results
HAMPTON, N.H. (June 25, 2002) — Ranked No. 1 and No. 2 by Technology Business Researchs mobile operator competitive benchmark, Cingular Wireless and Sprint PCS are the best-positioned mobile operators in the United States by profitability and growth, respectively. Leveraging its size advantage, Cingular Wireless is among the most profitable mobile operators in the United States. Sprint PCS met 1Q02 subscriber growth targets, adding more new subscribers than any other U.S. wireless carrier.
Technology Business Research
Ranks Cingular Wireless No. 1 in 1Q02 Benchmark Results
Focus on Profitability Propels Cingular Wireless to No. 1 Ranking
HAMPTON, N.H. (June 25, 2002) — Ranked No. 1 and No. 2 by Technology Business Researchs mobile operator competitive benchmark, Cingular Wireless and Sprint PCS are the best-positioned mobile operators in the United States by profitability and growth, respectively. Leveraging its size advantage, Cingular Wireless is among the most profitable mobile operators in the United States. Sprint PCS met 1Q02 subscriber growth targets, adding more new subscribers than any other U.S. wireless carrier.
Cingular Wirelesss and Verizon Wirelesss business models and financial results are evidence that mobile operators can be profitable in an industry constrained by massive debt levels. However, beyond profitability, Cingular is faced with a challenging and complex 3G network upgrade path. Network technology remains an important issue for Cingular, as Verizon Wireless and Sprint PCS herald the arrival of cdma1x, or high-speed wireless data services. Meanwhile, Cingular may not become an independent company since its parents SBC Communications and BellSouth are struggling to grow their businesses and view wireless as an important growth market with which to hedge the declining regional and long-distance phone markets," according to TBR wireless analyst Chris Foster (cfoster@tbri.com).
Following disappointing operating results in 4Q01 and several months of negative press regarding its short-term liquidity, Sprint PCS rebounded with an unexpectedly strong performance in 1Q02. The companys economies of scale continue to improve, as evidenced by the gross margin of 50.7% in 1Q02 – Sprint PCSs highest quarterly gross margin to date. Lower marketing expenses led to a decrease in SG&A expenses from $908 million in 4Q01 to $782 million in 1Q02. The result was the companys first quarterly operating profit. Sprint PCS continues to lead the industry in subscriber growth. In addition the company generated its first-ever operating profit in 1Q02," stated TBR wireless analyst Jay Slattery (jslattery@tbri.com). With a subscriber base approaching 15 million and increasing operating efficiencies the company is poised to reach profitability in 2003."
NBQ U.S. Mobile Operators 1Q02 Benchmark and Metrics*
Cingular Wireless Sprint PCS Nextel Verizon Wireless VoiceStream AT&T Wireless
NBQ Benchmark
NBQ Ranking 1 2 3 4 5 6
NBQ Score 5.44 5.20 4.98 4.88 4.79 4.72
Market Dynamics
Subscriber Market Share 16.5% 10.8% 6.9% 22.4% 5.7% 14.8%
Year-to-Year Subscriber Growth 6.3% 37.9% 27.4% 9.1% 36.4% 19.5%
ARPU $50 $61 $68 $46 $48 $59
Business Model
Year-to-Year Revenue Growth 6.3% 40.6% 23.7% 8.1% 32.0% 12.4%
Profitable Yes No No Yes No No
Cash Position $285 million $1.7 billion $3.2 billion ** $50 million $1.6 billion
Debt Position $12.5 billion $16.3 billion $13.8 billion ** $6.6 billion $8.2 billion
Network Infrastructure
2G Network TDMA/GSM CDMA iDEN/TDMA CDMA GSM TDMA
2.5/3G Migration Path GSM/GPRS to EDGE/UMTS cdma2000 TBD cdma2000 GSM/GPRS to EDGE/UMTS GSM/GPRS to EDGE/UMTS
Ownership
Investors SBC Communications and BellSouth Sprint FON Motorola Verizon Comm. and Vodafone DT T-Mobile NTT DoCoMo
Legal Status IPO delayed Public Public IPO delayed Subsidiary Public
- Partial metrics used in NBQ benchmark methodology.
** Not reported directly; Verizon Communications has $2.3 billion in cash $63 billion in debt.
The mobile operator industry is at a crossroad of reconciling massive debt incurred to license spectrum and to build out networks to support data applications and value-added services. Faced with slowed subscriber growth, the entire industry must focus on delivering a range of applications across multiple customer segments that will compel users to upgrade their phones and service plans, while generating greater traffic on mobile operator networks," stated Bill Lesieur, TBR director of Network Business Quarterly.
TBR believes consolidation for survival will occur in the U.S. mobile operator market during the next 12 months, with at least one major acquisition/merger among the big-six" U.S. wireless carriers. Despite statements by Verizon management that the company is not interested in making wireless acquisitions, we believe a merger between Verizon Wireless and Sprint PCS or AT&T Wireless and Cingular Wireless are likely scenarios pending regulatory approval. Exorbitant capital expenditure requirements will drive consolidation, or at a minimum will trigger more infrastructure sharing partnerships, as seen between Cingular Wireless and AT&T Wireless and Cingular and VoiceStream.
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About TBR:
TBR is a leading industry advisory firm providing comprehensive analysis of high-tech firms from a combined business, financial and technical perspective. TBR specializes in the computer, networking, mobile and professional services industries. Financial results and business models serve as the basis of TBRs analysis of vendors progress each quarter in meeting their strategic and functional objectives (product, marketing and manufacturing/supply chain). In each quarterly report, TBR tracks changes to the vendors internal strengths and weaknesses, along with external factors impacting market opportunities and competitive threats.
TBRs Network Business Quarterly service provides coverage of the leaders in wireless network infrastructure, mobile phones, mobile operators and the mobile Internet, including Ericsson, Nokia, Motorola, Nortel, Lucent, Alcatel, Cisco, Microsoft, Intel, Verizon Wireless [Verizon Communications (NYSE: VZ) and Vodafone (NYSE: VOD) joint venture], Cingular Wireless [BellSouth (NYSE: BLS) and SBC Communications (NYSE: SBC) joint venture], VoiceStream, AT&T Wireless (NYSE: AWE), Sprint PCS (NYSE: PCS), Nextel (NASDAQ: NXTL), Ericsson (NASDAQ: ERICY), Nokia (NASDAQ: NOK), Motorola (NYSE: MOT), Nortel (NYSE: NT), Lucent (NASDAQ: LU), Alcatel (NYSE: ALA), Cisco (NASDAQ: CSCO), Micosoft (NASDAQ: MSFT) and Intel (NASDAQ: INTC).
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Complete reports are available to accredited journalists.
For more information, please visit TBRs Web site at www.tbri.com, or contact:
Bill Lesieur, NBQ Director
Technology Business Research Inc.
603-929-1166
lesieur@tbri.com
Jon Lindy, Vice President of Sales
Technology Business Research Inc.
603-929-1166
lindy@tbri.com
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