U.S. Cellular blames iPhone for hike in churn, preps for LTE launch in March

U.S. Cellular took a competitive hit from the launch of the Apple's (NASDAQ:AAPL) iPhone 4S by competitors Verizon Wireless (NYSE:VZ), AT&T Mobility (NYSE:T), and Sprint Nextel (NYSE:S) in fourth quarter 2011. The company saw its churn increase to 1.63 percent from 1.52 percent in the same quarter the previous year, and attributed that hike to the iPhone launch.

However, U.S. Cellular expects to take back its competitive edge next month when it debuts its LTE service in its first wave of markets.  According to Mary Dillon, CEO of U.S. Cellular, the company will launch LTE in the next few weeks with its first device, a tablet. In April the company will launch its first LTE smartphones. Dillon added that the company expects to launch six to eight LTE devices (including smartphones, tablets and modems) in 2012 and will have 54 percent of its customers covered with LTE by year-end.

U.S. Cellular has said it will charge the same rates for LTE service as it currently does for 3G service. The carrier's LTE network will run in a 5x5 MHz configuration in its 700 MHz spectrum. Though the carrier hasn't said exactly what speeds users can expect from LTE, it is promoting the network as providing "speeds that are up to 10 times faster than 3G speeds."

Dillon also reiterated U.S. Cellular's plans to launch tiered pricing in the first half of the year but did not elaborate on the specifics of that tiered pricing, except to say that the company wants to offer a lower tier price plan that will offer an entry point for customers to upgrade to the smartphone.

U.S. Cellular did note that its fourth quarter retail gross adds were 298,000, up from 292,000 in the same quarter the previous year, which the company said is evidence that it is making progress in awareness and sales execution.

However, the company continues to struggle to keep its customers, even as it rapidly upgrades them from feature phones to smartphones. In the fourth quarter, U.S. Cellular reported a net loss of 20,000 postpaid customers and a gain of 7,000 prepaid customers, bringing its total subscriber base to 5.9 million.   

Other key metrics from the quarter:

Service revenue: U.S. Cellular's service revenue experienced an uptick in the quarter, increasing 4 percent to $1.03 million.

Smartphones: U.S. Cellular sold 505,000 smartphones in the fourth quarter, way up from the 395,000 smartphone it sold in the fourth quarter of 2010. Smartphones now make up 30 percent of the company's postpaid base. In the fourth quarter, U.S. Cellular's smartphone penetration increased to 52.5 percent of total devices sold.

Belief Project Plans: U.S. Cellular added 150,000 more customers to its Belief Project Plans in fourth quarter and now has 3.1 million of its customers on these plans.

ARPU: The carrier's postpaid average revenue per user clocked in at $53.35, up from $52.41 in the year-ago period.  

For more:
- see this release

Special Report: Wireless in the fourth quarter of 2011

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