U.S. Cellular to begin VoLTE trials, stays mum on LTE roaming partner

U.S. Cellular (NYSE:USM) plans to start trials of Voice over LTE technology in a few markets this quarter after completing its macro LTE deployment in the third quarter. However, the carrier did not reveal any details about an LTE roaming deal it had indicated in July would become operational soon.

Ken Meyers US Cellular CEO

Meyers

U.S. Cellular completed the LTE rollout four years after starting its deployment and completing it was one of the carrier's major priorities for the year. "It allows our customers, even in our very rural areas, to receive the benefits of our data services," U.S. Cellular CEO Ken Meyers said during the company's third-quarter earnings conference call.

The carrier is modifying its networks in northern Illinois and southern Wisconsin for the VoLTE trials and expects to begin "friendly" user trials this quarter.

However, Meyers made no mention of the company's LTE roaming deal. On July 31 on the company's second-quarter earnings conference call he had said U.S. Cellular had completed its first LTE roaming agreement, though he declined then to reveal the carrier partner. He said the companies were in the implementation phase of the deal and the respective engineering teams of the companies were working together. U.S. Cellular customers would be able to start benefiting from expanded LTE roaming in the next 60 to 90 days, he said. The partner is likely a Tier 1 carrier, so U.S. Cellular customers will get access to a more robust and nationwide LTE network.  

"We are working to operationalize our 4G LTE roaming agreement this quarter," U.S. Cellular spokeswoman Katie Frey told FierceWireless, declining to elaborate further. 

In other company news, U.S. Cellular discontinued it loyalty rewards program on Sept. 1. All unredeemed rewards points expired and the deferred revenue related to the expired points was recognized as $58.2 million in service revenues in the quarter. The end of the program had an effect on all of the carrier's financial metrics in the quarter. Meyers said the program was "very innovative" when it was first rolled out five years ago but that in a more "price-competitive" environment the value of the program had "diminished." U.S. Cellular is going to focus its resources in areas that its customers care about, Meyers said.  

Here is a breakdown of U.S. Cellular's key quarterly metrics:

Subscribers: U.S. Cellular added 17,000 postpaid customers in the third quarter, flat from the second quarter and lower than 52,000 in the year-ago period. Meyers said that the company's gross postpaid additions of 200,000, which were down from 251,000 a year ago, were lower than the company wanted and were partly a result of lower traffic to the company's retail stores, similar to other electronics stores.  

The carrier added 12,000 prepaid customers, up from 8,000 in the second quarter and a turnaround from a loss of 2,000 prepaid subscribers in the third quarter of 2014.

U.S. Cellular ended the quarter with 4.72 million total subscribers.

Financials: The company said total revenue excluding the rewards program impact was $1.01 billion, essentially flat from a year ago. Retail service revenue was down 1 percent year-over-year to $739 million. Equipment revenue jumped 16 percent from a year ago to $173 million.

Smartphones: The company sold 522,000 smartphones in the quarter, representing 87 percent of devices sold. U.S. Cellular's smartphone penetration reached 72 percent in the quarter, up from 69 percent in the second quarter and 62 percent a year ago. Meyers said that 44 percent of devices sold in the quarter were on equipment installment plans, and the company expects that figure to go up to around 50 percent in the fourth quarter, especially because U.S. Cellular's agents are now selling EIP. Around 23 percent of the carrier's postpaid customer base is now on EIP.     

Churn: U.S. Cellular said postpaid churn was 1.41 percent in the third quarter, up from 1.34 percent in the second quarter but down from 1.59 percent in the year-ago period. The company expects to see continued improvements in churn.

ARPU: The carrier said postpaid average revenue per user, excluding the impact of the shutdown of the rewards program, was $53.64, down from 5 percent from $56.37 a year ago. However, when adding in EIP billings, ARPU was $59.50, up 3 percent from $57.61.

For more:
- see this release
- see this presentation (PDF)

Special Report:  Wireless in the third quarter of 2015

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