U.S. Cellular's 2010 revenue takes a hit on promotions

U.S. Cellular said it expects its full-year service revenues to fall below expectations due to a series of promotions it enacted to try and lure customers.

The regional carrier, which operates in 26 states, said it expects 2010 service revenues to fall slightly below its full-year guidance of $3.925 billion to $3.975 billion. U.S. Cellular will report its full 2010 and fourth-quarter results Feb. 24.

U.S. Cellular blamed the drop in revenue on promotions it launched in the fourth quarter, including switching credits, reduced activation fees and increased handset subsidies. The promotions were designed to attract and retain customers, as well as to drive growth in smartphone penetration and data usage. For example, in late November U.S. Cellular offered both new and current customers a $150 credit on future bills when they added a smartphone line. The carrier said 39 percent of handset sales in the fourth quarter were smartphones, led by phones running Google's (NASDAQ:GOOG) Android platform.

U.S. Cellular said it ended the year with 6.1 million total subscribers, unchanged from the end of 2009. During the fourth quarter, U.S. Cellular lost 10,000 postpaid customers and 11,000 prepaid customers. However, the company said it recorded higher-than-anticipated sales of its new Belief Project plans, with nearly 1.2 million new and existing customers adopting the plans, and higher-than-expected sales of smartphones. 

U.S. Cellular has been trying to re-focus its efforts on customers since Mary Dillon took over as CEO earlier this year. In late September, the company kicked off a new rate plan policy called The Belief Project. The plan offers reduced overage charges, earlier phone upgrades, paperless billing discounts and free accessories. In addition, the company doesn't require customers to sign a new two-year contract after they fulfill their first one.

For more:
- see this release
- see this Dow Jones Newswires article (sub. req.)

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