Verizon is going to announced its second-quarter financial results tomorrow, and they are sure to make competitors cringe. Its wireless business has already reported 1.8 million net adds that were direct retail subscriber additions--that is, those customers the company directly serves and manages, not from MVNOs or resellers. And look for the company to report record low churn again. Cingular already reported financial results beat analysts' expectations, adding a surprisingly high 1.5 million net subscriber additions as well as the company's highest-ever net income of $540 million. The operator also pushed its churn rate down to 1.7 percent overall--another best-ever performance.
With the country's top two wireless operators reporting record results, Sprint Nextel has to be a bit nervous. Its stock is already way down--falling about 28% since peaking at $26.70 in early April, despite the insistence from analysts that investors are undervaluing the stock and overstating Sprint's higher churn. But there are some glaring facts that investors cannot ignore. According to John Byrne, analyst with Network Business Quarterly, the main concern is how to address flagging subscriber growth. In the first quarter, Sprint Nextel added just 563,000 postpaid retail customers under the Sprint and Nextel brands. By comparison, standalone Sprint and Nextel added 518,000 and 496,000 postpaid retail additions, respectively, in the first quarter 2005, which means postpaid retail growth was down 44.5 percent on a pro forma basis.
Analysts just last year were singing the praises of Sprint's strategy to embrace MVNOs and its prepaid youth brand Boost to bring in bigger subscriber numbers as they expected the market to reach saturation. But Verizon has shown that an operator can still bring in record numbers without such a strategy. MVNOs, in turn, have lost their luster in the market as many are bringing in lower-than-anticipated numbers. Meanwhile, Sprint continues to spread the gospel that prepaid and MVNO customers aren't bad customers, but it doesn't seem that investors are buying it. We'll see what the second quarter holds.
Also, amid the pounding CDMA technology has taken in recent weeks as some operators announce intentions to flip from CDMA to GSM and Lucent reports some slowing down of the CDMA market, the CDMA Development Group has issued a new CDMA2000 fact sheet on its web site designed to outline the various ways in which the technology has achieved leadership in delivering advanced performance to networks across the globe. - Lynnette