United States Cellular Corp.
(
USM
), a subsidiary of
Telephone and Data Systems Inc
. (
TDS
) has reported first quarter 2012 earnings per share of 73 cents,
32 cents ahead of both, the Zacks Consensus Estimate and the
year-ago earnings. The outperformance was driven by strong demand
for smartphones and data services.
Net income attributable to shareholders also increased 77.7%
year over year to $62.5 million in the reported quarter.
First quarter revenues of $1,092.1 million were ahead of the
Zacks Consensus Estimate of $1,086 million and increased 3.3% from
$1,057.1 million in the year-ago quarter driven by strong
smartphone sales.
Revenue, ARPU & Churn
Quarterly
Service
revenue upped 4% year over year to $1,023.8 million. Revenues from
Equipment
sales were down 5.1% year over year at $68.3 million primarily due
to lower total equipment transactions, although smartphone sales
remained strong and represented approximately 54.1% of all sold
devices versus 42.5% in the year-ago quarter.
The reported quarter's retail service ARPU (average revenue per
user) was $50.52 compared with $47.65 in the year-ago quarter.
Post-paid churn deteriorated to 1.6% from 1.4% in the year-ago
quarter due to competitive pricing.
Subscriber Statistics
U.S. Cellular marked a net subscriber loss of 34,000 from retail
customers compared to 31,000 net loss in the year-ago quarter.
Total subscriber base went down to 5.8 million from 6.0 million in
the year-ago period. The company exited the quarter with a retail
customer base of 5.6 million compared with 5.7 million in year-ago
quarter. The company added 211,000 customers in its Belief plan in
the first quarter.
Liquidity
U.S. Cellular generated $257 million in cash flow from operating
activities in first quarter compared with $258 million in the
year-ago quarter Capital expenditures were $201.3 million as
against $96 million in the comparable prior-year period. The
company reported free cash flow of $47.8 million versus $136.7
million in the year-ago quarter.
Guidance
For fiscal 2012, U.S. Cellular maintained all its previously
projected estimates. The company expects revenue in the range of
$4,050-$4,150 million and operating income in the range of
$200-$300 million. Adjusted OIBDA is estimated in the range of
$800-$900 million. Capital expenditure is expected to be
approximately $850 million.
Our Analysis
U.S. Cellular managed to benefit from the growing demand for
smartphones that is driving growth in data services and post-paid
customer addition. Additionally, the company's increased
investments in advanced network technology deployment along with
its foray into Long-Term Evolution (LTE) services will also bode
well despite several integration problems, intense competition from
telecom giants like
AT&T
(
T)
and
Verizon Communications
(
VZ
), pricing, regulatory pressures pertaining to Universal Service
Fund and economic uncertainty.
Consequently, we recommend a long-term Neutral rating on U.S.
Cellular supported by a Zacks #3 Rank (Hold).
AT&T INC (T): Free Stock Analysis Report
TELEPHONE &DATA (TDS): Free Stock Analysis
Report
US CELLULAR (USM): Free Stock Analysis Report
VERIZON COMM (VZ): Free Stock Analysis Report
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