By almost all measures, U.S. Cellular is hurting. The country’s fifth-largest carrier lost 88,000 customers in its second quarter as subscribers defected to carriers with exclusive handset arrangements.
U.S. Cellular is struggling to avoid the fate of its fellow regional carriers: consolidation. Shareholders of U.S. Cellular’s parent company, TDS, have been pressuring the company for change.
Southeastern Asset Management, which has a 5.5 percent stake in the company, recently called for TDS to sell itself off or get rid of U.S. Cellular. Similarly, TDS recently appointed two members from investor Gamco to its board of directors after that company asked for changes to TDS management.
Although the carrier managed to earn $83.4 million on cost-cutting measures, sales dipped to $1.04 billion despite a 31 percent increase in data revenues.
Other measurements of the carrier’s health also showed signs of strain. Churn rose three-tenths of a percentage point to 1.7 percent despite the carrier’s focus on customer service. ARPU also worsened, slipping to $52.41 from $53.27 last year.
U.S. Cellular withdrew its previous subscribership forecast, which predicted it would add between 75,000 and 150,000 customers in 2009. In addition, it lowered its service revenue forecast to between $3.9 billion and $3.95 billion from its earlier prediction of $3.9 billion to $4 billion.
The carrier has been a vocal opponent to handset exclusivity deals. In his June testimony before the U.S. Senate Committee on Commerce, Science and Transportation, U.S. Cellular President and CEO John Rooney argued that such arrangements are anticompetitive and harmful to rural areas.
“By leveraging their market dominance in negotiations with handset manufacturers, the largest wireless carriers are locking up almost all of the most advanced, attractive handsets for many months or years,” Rooney said. “These practices deprive rural areas of leading handset-enabled applications and features, and impede the productivity of rural businesses, important services to rural residents and the expansion of broadband capabilities.”
