Wireless Companies Post Improved Performances

By Joseph Palenchar On Feb 8 2010 - 8:00am

Several leading wireless companies reported increases in revenues, profits or net subscribers for their most recent quarters.

Motorola, Nokia, AT&T, Verizon and SonyEricsson all reported improvements in their fiscal performances compared with the same quarter in the previous year.

Motorola posted its third consecutive quarterly net and operating profit in the fourth quarter on significantly lower losses by the company's wireless-handset division, which reduced its own operating losses for the fifth consecutive quarter.

In the fourth quarter of 2009, the company shipped 12 million phones worldwide, generating $1.82 billion in revenue. A total of 2 million of those phones were smartphones, almost all of which were Android-based, helping drive up average selling prices to $169 from the previous quarter's $124.

For the fourth quarter of 2009, handset-division sales were down 22 percent year over year to $1.82 billion, and the division's operating loss shrank to $132 million from a year-ago $595 million loss and sequentially from a third-quarter $183 million loss.

Company-wide, revenues declined in the fourth quarter by 20 percent year over year to $5.72 billion and fell 27 percent for the full year to $22 billion. Company-wide operating earnings were $163 million in the quarter, compared with a year-ago $1.68 billion operating loss. Full-year losses came to $148 million, down from the year-ago $2.39 billion operating loss.

AT&T's wireless segment ended the year on a high note, posting its second highest quarterly net subscriber gain in the fourth quarter, its second highest quarterly number of iPhone activations in the quarter, and a full-year net subscriber gain that matched its previous record.

The carrier also posted a quarterly record in activations of emerging devices such as e-readers and portable navigation devices (PNDs).

AT&T executives also confirmed that, in contrast to its iPhone post-paid business model, it is not subsidizing Apple's new iPad media tablet, nor is it sharing revenues from the iPad's prepaid data plans with Apple. The economics of the strategy will “be very positive” because of lower acquisition costs compared to the iPhone and lower setup costs, given that consumers will activate the device on-line and pay for service with a credit card, said chief financial officer Rick Lindner. The company did not mention whether the iPad, like the iPhone, would be sold through AT&T-owned stores.

AT&T also revealed that 3.1 million iPhones were activated in the fourth quarter, down from the previous' quarter's 3.2 million, but the previous quarter was the first full quarter in which the new iPhone 3G S and reduced-price iPhone 3G were available. Despite the sequential slide, iPhone activations in the fourth quarter exceeded the year-ago quarter's 1.9 million and represented the second highest quarterly number of iPhone activations to date, AT&T said. More than a third of the activations came from users new to the AT&T network, compared with almost 40 percent in the third quarter, AT&T's reports show.

AT&T's net subscriber additions came to 2.7 million in the fourth quarter, up from the year-ago 2.1 million, and hit 7.3 million for the full year, up from 2008's 7 million. Verizon's were up 43 percent in the quarter to 2.24 million, but down 21 percent for the full year to 5.97 million.

Nokia reported a higher operating profit but lower net sales for the fourth quarter, ended Dec. 31, 2009.

Operating profit was 1.47 billion euros, a gain of 18.9 percent from the prior year's fourth quarter, while net sales slumped 5.3 percent to 11.9 billion euros.

In its devices and services unit during the fourth quarter of 2009, total mobile device volumes were 126.9 million units, representing an increase of 12 percent year on year. The overall industry mobile device volumes for the same period were 329 million units based on Nokia's estimate, representing an increase of 8 percent year on year.

Nokia's converged mobile device volumes, comprising smartphones and mobile computers, were 20.8 million units in the fourth quarter 2009, compared with 15.1 million units in the fourth quarter 2008 and 16.4 million units in the third quarter 2009.

The company reported that North America unit sales for in the fourth quarter were 3.8 million, down 7.3 percent from the prior year's final quarter.

Verizon Wireless posted a 0.2 percent sequential gain in service revenues to $13.6 billion in its fiscal fourth quarter, marking the lowest sequential fourth-quarter gain in years because rising data revenues failed to offset larger declines in voice revenues.

The number of net new subscribers, however, resumed year-over-year growth in the fourth quarter on a pro forma basis, when the carrier gained 2.2 million net subscribers, up from the year-ago 1.57 million.

Sell-through of smartphones was so strong in the fourth quarter that the carrier's operating income margin slipped to 27.3 percent from the previous quarter's 28.3 percent and the year-ago 29 percent. Smartphones are more heavily subsidized by carriers than other phone types to stimulate data-revenue growth.

Because of faster uptake in smartphones and 3G multimedia purchases, fourth-quarter data revenues grew to account for 31.9 percent of total service revenues (voice and data combined), up from 26.5 percent in the fourth quarter of 2008 on a pro forma basis.

In the fourth quarter, data revenue grew sequentially by 4.8 percent to $4.33 billion, but the gain didn't offset a 2.7 percent sequential decline in voice revenues to $9.22 billion, resulting in total service revenue growth of only 0.2 percent to $13.55 billion.

A refreshed handset portfolio and ongoing restructuring have begun to improve SonyEricsson's financial results, shrinking fourth-quarter operating losses sequentially and year-over-year.

Unit shipments fell 40 percent year over year to 14.6 million in the fourth quarter ending Dec. 31, but fourth-quarter shipments were up sequentially from the third quarter's 14.1 million. Fourth-quarter dollar volume fell 40 percent to $2.46 billion from the year-ago quarter and by 3.5 percent sequentially, with fourth-quarter operating losses shrinking 31 percent from the year-ago period to $254.8 million. Sequentially, fourth-quarter operating losses shrank 6.2 percent. The numbers are based on a currency conversion rate of 1 euro to $1.41.

Fourth-quarter net losses of $235.1 million were down from a year-ago $1.18 billion but up slightly from the third quarter's $230.9 million.

For more details on each company's performance, see www.TWICE.com. — Additional reporting by Steve Smith

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