Telephone & Data Systems Inc.'s (TDS) first-quarter earnings
rose 20% as the profit at its U.S. Cellular Corp. (USM) jumped a
better-than-expected 77%.
U.S. Cellular--which accounts for the bulk of TDS's revenue--has
been steadily losing postpaid subscribers amid fierce competition
in a wireless industry nearly saturated with cellphones. In an
effort to attract prepaid subscribers, U.S. Cellular teamed up with
Atlantic Tele-Network Inc.'s (ATNI) Alltel Wireless unit to sell "U
Prepaid" no-contract wireless service in nearly 500 Wal-Mart Stores
Inc. (WMT) locations, starting this month.
Standard & Poor's Ratings Services in March lowered its
ratings outlook for both TDS and U.S. Cellular to negative from
stable, saying competitive pressures at U.S. Cellular could
intensify, resulting in increased subscriber losses.
TDS--a provider of wireless, landline and broadband
services--reported a profit of $52.2 million, or 48 cents a share,
up from $43.5 million, or 39 cents, a year earlier. Analysts polled
by Thomson Reuters had most recently forecast earnings of 35
cents.
Revenue jumped 3.7% to $1.31 billion, reflecting a 2.6% rise in
TDS Telecom revenue. Operating margin edged up to 7.2% from
7.1%.
Meanwhile, cellphone-service provider U.S. Cellular reported a
profit of $62.5 million, or 73 cents a share, up from $35.2
million, or 41 cents, a year earlier. Operating revenue jumped 3.3%
to $1.09 billion.
Analysts polled by Thomson Reuters had most recently forecast
earnings of 44 cents on revenue of $1.09 billion.
Operating margin rose to 7.8% from 5.6%.
The carrier said it lost 38,000 postpaid customers in the
most-recent quarter, pushing its total base down 3.2% to 5.84
million customers from 6.03 million a year earlier.
Postpaid average revenue per contract customer rose 5.4% to $54.
The customer turnover rate, known as churn, rose to 1.6% from 1.4%
a year ago and was flat with the prior quarter.
Both companies backed their full-year guidance
Shares of TDS and U.S. Cellular closed Thursday at $24.44 and
$40.51, respectively. Both were inactive premarket.
-By Melodie Warner, Dow Jones Newswires; 212-416-2283;
melodie.warner@dowjones.com