Cingular's indigestion could be worse

Churn down below

The cost of swallowing AT&T Wireless dulled the results of the United States' largest mobile network Cingular. Profits fell to $147m for 2Q FY2005, a loss of $93m over the first six months of this year. Revenue for the quarter was $8.61bn. Merger costs were $204m in the period.

But at least the indigestion doesn't signal food poisoning.

Cingular spent $41bn on a company in turmoil. AT&T Wireless rarely managed to turn a profit, and its final months as an independent company were marred by subscribers fleeing for other providers after it botched number portability. This chaos doesn't appear to have infected Cingular, as there were no nasty surprises in the subscriber numbers. Cingular added 1.1m net subscribers, monthly churn is 2.2 per cent - down for the third quarter running - and ARPUs (Average Revenue Per User) fell slightly to $50.75. Almost all of the 4.4m new subscribers bought postpaid contracts.

7 per cent of the subscriber base switched from TDMA to GSM in the quarter, leaving 22 per cent yet to switch, although GSM carried nine out of every ten minutes of calls on the combined network. AT&T's TDMA users have been a focus for rival carriers as Cingular has upgraded the network to the global standard, which required new handsets.

Cingular has barely begun to integrate the infrastructure of the two companies, admitted Cingular CEO Stan Sigman, which is where the real savings - and risks, too will be found. ®

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