U.S. Cellular: We said no to Apple's iPhone
U.S. Cellular turned down Apple's (NASDAQ:AAPL) iPhone because it did not make sense for the company economically, CEO Mary Dillon said on the company's third-quarter earnings conference call.
Dillon said that the carrier had the opportunity to sell the iPhone but that Apple's "terms were unacceptable from a risk and profitability standpoint." Dillon added that the potential strain on the company's network was not a factor in the decision, and that U.S. Cellular remains open to carrying the iPhone in the future.
U.S. Cellular's decision is notable in light of the fact that C Spire Wireless, formerly Cellular South, will begin offering the iPhone 4S and iPhone 4 Nov. 11. C Spire, which has around 875,000 customers primarily in the South, will sell the device for the same prices that AT&T Mobility (NYSE:T), Sprint Nextel (NYSE:S) and Verizon Wireless (NYSE:VZ) currently offer. The iPhone 4S retails for $199.99 for the 16 GB model, $299.99 for the 32 GB model and $399.99 for the 64 GB model, with a two-year contract. Additionally, like the Tier 1 carriers, C Spire will offer an 8 GB iPhone 4 for $99.99 with a two-year contract.
In other U.S. Cellular news, the company said it still intends to introduce tiered data plans in the first half of 2012, but did not provide any more information.
Tiered data pricing "will not only help us on monetizing the data growth, but that will also, in combination with lower-cost smartphones, allow customers to move from feature phones to their very first smartphone," Alan Ferber, U.S. Cellular's executive vice president and chief strategy and brand officer, said on the call.
The Tier 2 carrier posted net income of $62.1 million in the quarter, up 62 percent from $38.3 million in the year-ago period. Total revenue for the quarter climbed 5 percent to $1.11 billion. Service revenue also rose by 5 percent to around $1.036 billion.
Here is a breakdown of U.S. Cellular's key quarterly metrics:
Smartphones: The company said 40 percent of the devices it sold in the quarter--356,000 units--were smartphones, up from 23.6 percent in the year-ago period, or 216,000 units. U.S. Cellular added that 26 percent of its postpaid subscriber base now has a smartphone, up from 12.1 percent in the year-ago quarter.
LTE: Dillon confirmed that U.S. Cellular will deploy LTE to around 25 percent of its footprint by year-end. The company will launch its first LTE devices by the end of the first quarter of 2012. Dillon said the company is currently evaluating where to deploy LTE throughout 2012. Ferber said that the company will likely not deploy Voice over LTE until 2013 at the earliest. However, he did say that the company's LTE devices would be cheaper to launch than the iPhone would cost.
Subscribers: U.S. Cellular said reported a net loss of 23,000 retail customers, including a loss of 34,000 postpaid customers and gain of 11,000 prepaid customers; postpaid customers comprised 95 percent of retail customers. The customer losses were smaller than the 58,000 total customers it lost in the second quarter as well as the 25,000 it lost in the year-ago period. U.S. Cellular ended the quarter with a total of 5.62 million customers. Dillon said that the company's Belief Plans, which include customer loyalty features, now have 2.8 million customers, and that U.S. Cellular added 452,000 Belief Plan customers in the quarter.
Churn: Postpaid churn dropped slightly to 1.55 percent, down from 1.58 percent in the year-ago quarter. U.S. Cellular noted that the third quarter is usually the quarter with its highest churn rate.
ARPU: Total average revenue per user climbed to $58.09, up from $53.53 in the year-ago period. Postpaid ARPU climbed to $52.41 from $50.82 in the year-ago quarter.
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