Press Release: SunCom Wireless Announces Sharply Higher Adjusted EBITDA for the Second Quarter of 2007
SunCom Wireless Announces Sharply Higher Adjusted EBITDA for the Second Quarter of 2007
Adjusted EBITDA Increases Over 100% and Margin Expands to 22.8 Percent
BERWYN, Pa., July 31 -- SunCom Wireless Holdings, Inc. (NYSE: TPC - News) today reported operating and financial results for the second quarter of 2007. Adjusted EBITDA was $50.3 million for the quarter compared with $24.5 million in the second quarter of 2006, while Adjusted EBITDA margin expanded to 22.8 percent from 20.5 percent in the first quarter of 2007 and from 13.3 percent in the second quarter of 2006. Cash flows used in operations were $12.5 million for the three months ended June 30, 2007, compared with a use of $20.8 million for three months ended June 30, 2006.
Service revenue for the quarter was $195.7 million compared with $164.4 million in the second quarter of 2006. The increase in service revenue was the result of higher ARPU and a greater number of subscribers compared with the second quarter of 2006. ARPU increased to $57.21 in the second quarter from $55.70 in the first quarter of 2007 and from $52.89 a year ago, reflecting higher access revenue, increased feature revenue, such as SMS messaging and downloadable ring tones, as well as increases in miscellaneous revenue. Net additions were 16,128 in the quarter and increased the Company's subscriber base almost 106,000 to 1,136,966 compared with 1,031,443 a year ago. Monthly churn for the second quarter 2007 was 2.4 percent compared with 2.2 percent in the second quarter of 2006. The increase in churn is primarily attributable to SunCom's prepaid service offering, which was introduced in only its domestic operations in the third quarter of 2006. In the second quarter in its domestic business, the Company added a net 5,526 prepaid customers, while postpaid subscribers increased by 11,810. Offsetting this strong growth in prepaid and postpaid subscriber additions was an 11,062 decrease in month-to-month subscribers, which is a predominantly credit- challenged sub-segment of the Company's subscriber base. The Company increased the access price and handset equipment pricing for these rate plans to improve profitability, which had the impact of reducing gross adds and increasing churn for this sub-segment. At June 30, 2007, less than 5 percent of its domestic subscriber base was on one of these rate plans.
Roaming revenue increased 29 percent to $25.1 million from $19.5 million in the second quarter of 2006 on the strength of higher roaming volumes and increased data traffic. Roaming minutes of use increased 32 percent to 338.6 million in the quarter from 256.4 million minutes a year ago. Since the beginning of the third quarter of 2007, SunCom has seen roaming volumes from its largest roaming partner decline. After discussions with this partner, SunCom estimates that this change will result in an approximate 25 percent decrease in volumes, or approximately $5 million less roaming revenue, on a quarterly basis, as compared to the second quarter of 2007.
"We continue to see improving performance in our business, driven by higher subscriber counts and ARPU, as well as improved efficiencies. This provides further evidence that our strategy to attract these high-ARPU subscribers with value rate plans is the right one," said Michael E. Kalogris, Chairman and CEO of SunCom Wireless. "With six consecutive quarters of Adjusted EBITDA growth and margin expansion, we remain confident in the growth of SunCom."
Cash cost per user (CCPU) improved $2.43 to $37.47 compared with $39.90 in the second quarter of 2006. The decrease reflects the decommissioning of the Company's TDMA network and a reduction in interconnection expenses along with the increase in the Company's subscriber base.
Net loss for the quarter was $193.0 million, or $5.80 per share, which includes a loss of 182.9 million, or $5.50 per share, resulting from the debt- for-equity exchange. This compares to a net loss of $110.4 million, or $16.07 per share, a year ago. Excluding the loss on the debt-for-equity exchange of $182.9 million results in a net loss for the quarter of $10.1 million or $0.30 per share.
Capital expenditures for the quarter were $11.0 million compared with $30.9 million a year ago, and the Company ended the second quarter of 2007 with $184.6 million of cash and short-term investments.
Other Recent Developments
On May 15, 2007, the Company completed its previously-announced exchange with holders of certain of SunCom Wireless Inc.'s subordinated notes, as well as the related reverse stock split. Both transactions were approved by the Company's shareholders on April 20, 2007, and the exchange was subsequently approved by the Federal Communications Commission. As a result of the exchange transaction, SunCom reduced its principal debt amount by approximately $731.6 million and its annual interest payments by approximately $66.2 million, giving the Company greater financial flexibility. Bondholders who previously held or beneficially owned approximately 98.3% of the aggregate outstanding 9-3/8% Senior Subordinated Notes due 2011 and 8-3/4% Senior Subordinated Notes due 2011 of SunCom's indirect, wholly-owned subsidiary, SunCom Wireless, Inc., have exchanged subordinated notes for 87.9% of the Company's Class A common stock. In the merger transaction, which occurred immediately prior to the exchange transaction, each outstanding share of SunCom's Class A common stock was converted into 0.1 share of Class A common stock for the primary purpose of implementing a 1-for-10 reverse stock split.
On July 13, 2007, the Company's Class A common stock resumed trading on the New York Stock Exchange (NYSE) under the ticker symbol "TPC". Following SunCom's appeal of NYSE's December 19, 2006 suspension of trading, NYSE Regulation recommended, and the NYSE Regulation Board of Directors' Committee for Review determined, that trading of SunCom's Class A common stock on the NYSE should resume. SunCom Wireless shares had been trading on the OTC Bulletin Board most recently under the ticker symbol "SCWH". The suspension was based on a determination of non-compliance with NYSE's market capitalization standard.
On these two milestones, Mike Kalogris remarked, "With the reduction in our net leverage position to less than five times and the return to the NYSE, we have dramatically improved the Company's financial standing, which we expect will serve it well going forward."
Forward-Looking Statement
Statements regarding the Company's future plans and growth prospects in this release are forward-looking statements. These statements are subject to risks and uncertainties, including those discussed in the Risk Factor section of the Company's prospectus dated June 19, 2007, and other filings the Company makes with the U.S. Securities and Exchange Commission. Actual results could differ materially from these forward-looking statements. Company undertakes no obligation to update any forward-looking statements.
About SunCom Wireless
SunCom Wireless is a leader in offering digital wireless communications services to consumers in the Southeastern United States, Puerto Rico and the U.S. Virgin Islands. With more than 1 million subscribers, SunCom is committed to being a different kind of wireless company focused on treating customers with respect, offering simple, straightforward plans and providing access to the largest GSM network and the latest technology choices. SunCom Wireless is a proud provider of Wireless AMBER Alerts. For more information about SunCom products and services, visit www.suncom.com or call 877-CALL-SUN (1-877-225-5786).
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