U.S. Cellular added more expensive data tiers with higher usage thresholds to its data plans for its postpaid subscribers, and it also maintained that it will expand its LTE network as the year goes on to 50 percent of its footprint. U.S. Cellular CEO Mary Dillon made the comments in conjunction with the carrier's first-quarter earnings, which were strong financially but showed that the company is still losing customers.
Click here for key slides from U.S. Cellular's quarterly earnings presentation.
The company made the service pricing changes May 1. Interestingly, Alan Ferber, U.S. Cellular executive vice president and chief brand officer, said that while the company is exploring the idea of family data plans, it is not announcing anything at this point.
Dillon also touched on the U Prepaid plan that U.S. Cellular and Alltel will begin offering in select Walmart stores across 18 states beginning later this month. Dillon did not give details on the pricing or phones being offered in the plan, but said that U.S. Cellular will be present in 414 of the 450 Walmart stores where the U Prepaid plan will be offered. She said it is an opportunity to be where customers want to shop and would lead to incremental revenues.
Here is a breakdown of U.S. Cellular's key quarterly metrics:
Belief Plan changes: The carrier said that as of May 1 it started offering additional tiered data options and new pricing structures for is Belief plans. For individual lines the company now offers 450 voice minutes and unlimited messaging for $50 per month, 1,000 voice minutes and unlimited messaging for $70 per month and unlimited voice and messaging for $90 per month. On the data front, the carrier now offers 300 MB for $20 per month and 2 GB for $25 per month. The carrier also has plans that include tethering: 4 GB for $45 per month, 5 GB for $50 per month and 10 GB for $90.
With the new data plans, if customers use additional data, they won't be charged per extra MB of data usage as before. Instead, they will be charged only $10 to go up into the next tier of data.
Previously, U.S. Cellular's top data tier was 5 GB of data.
Dillon said the new plans will help drive new customer growth, increase profitability and maintain ARPU growth. However, the carrier is also increasing the length of its upgrade period from 18 to 22 months and is not offering its phone replacement policy for new Belief plan customers. Customers who are satisfied with their current plans can stay on those plans and do not have to change, and customers can move to a new plan at any time for no charge.
In a report, Current Analysis analysts Weston Henderek and Jamie Huff wrote that the carrier's new plans "offer consumers greater flexibility and less confusion than its previous rate plan lineup, which automatically bundled voice, messaging, and data services. Customers now have the option of choosing between four different data packages that are available on all rate plans, as well as the possibility of adding unlimited messaging."
However, they also wrote that U.S. Cellular's new plans are "more expensive than its previous postpaid portfolio, which will limit the interest in the carrier by new and existing customers." The new plans have cheaper voice-only components than before, but in most cases, the analysts wrote, U.S. Cellular customers who choose the new messaging and data plans will be paying more.
Smartphones: U.S. Cellular said that smartphones accounted for 54.1 percent of all devices sold in the quarter, up from 42.5 percent in the first quarter of 2011. The carrier's smartphone penetration rate increased to 34.4 percent of postpaid customers, up from 20.3 percent in the year-ago quarter.
LTE: Dillon said the first wave of U.S. Cellular's LTE rollout is underway in markets in Iowa, Maine, North Carolina, Oklahoma, Texas and Wisconsin. She said by the end of the year 50 percent of U.S. Cellular's customers will be covered by LTE. U.S. Cellular currently covers 92.6 million total POPs with its network footprint.
Subscribers: The company reported a net loss of 34,000 retail customers, reflecting a loss of 38,000 postpaid customers and gain of 4,000 prepaid customers. Postpaid customers comprised 94 percent of retail customers. At the end of the first quarter U.S. Cellular had 5.57 million retail customers and 5.84 million total customers. The company added 211,000 customers to its Belief plans in the quarter, and now counts 3.3 million total subscribers on the plans.
Churn: Postpaid churn increased to 1.6 percent from 1.4 percent in the first quarter of 2011.
ARPU: Total average revenue per user climbed to $58.21 from $54.29 in the year-ago period. Postpaid ARPU stood at $54, up from $51.21 in the year-ago quarter.
Financials: The Tier 2 carrier reported $62.5 million in net income in the first quarter, compared with $35.2 million in the first quarter of 2011. Total operating revenues were up 3 percent to $1.09 billion. Service revenue was up 4 percent to $1.02 billion.
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