Regional operator UScellular lost 8,000 postpaid net customer additions in the third quarter of 2021, which includes 5,000 postpaid phone net additions, so it’s looking forward to a better fourth quarter.
“We're hoping this quarter will be a bit more robust, we're expecting a higher switcher pool this year and that's going to help on the customer acquisition side,” said UScellular CFO Doug Chambers during the company’s earnings call on Thursday. “We're expecting to do fairly well in churn as well. So, I think we're going to have a little bit better fourth quarter as far as opportunity this quarter than we did last year.”
Last year saw a lot of demand for connected devices, which is tapering off this year. Connected device gross additions declined 26,000 year-over-year, driven by lower sales of internet products, such as hotspots and tablets, compared to last year, when they saw increased demand due to the pandemic.
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But first things first. UScellular President and CEO Laurent Therivel, known as “LT,” was asked about the recent delay in the C-band deployment. UScellular spent $1.28 billion for 254 licenses in the C-band auction that wrapped up earlier this year, and its bigger rivals AT&T and Verizon were expected to start rolling out C-band in December, which has been pushed back a month due to Federal Aviation Administration (FAA) concerns.
Therivel said he didn’t have any immediate answers as to how the C-band situation is going to get resolved. “Our C-band spectrum, which would be what is affected, we're not going to be firing that spectrum up until 2023, late 2023, and have a lot of confidence that situation will get resolved by that point, and so I don't think that it necessarily affects our rollout one bit.”
FWA: Full-steam ahead
One area that’s still developing at UScellular but gaining a lot of interest from investors is fixed wireless access (FWA). Bigger rivals Verizon and T-Mobile are both bullish on the sector, with their respective FWA offerings competing with cable/wireline rivals, but their go-to-market strategies are different.
UScellular is optimistic on the use of millimeter wave (mmWave) spectrum for fixed wireless access, and trials continue to be underway to validate network performance and customer experience. The operator recently launched commercial offers in a small set of markets, with a more aggressive commercialization plan for 2022.
Right now, it’s offering commercial mmWave FWA speeds of up to 300 megabits per second and many customers are getting speeds that “far exceed” that, he said.
Therivel emphasized the difference between what Verizon is doing and UScellular, saying his company is running its FWA trials and commercialization off of macro cellular. Verizon is primarily doing it using small cells, “so if you think about where small cells reach, you're generally going to be deploying those in more dense environments. In our case, we're trying to reach more rural areas,” where he sees greater opportunity relative to other competitors.
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UScellular has seen “terrific results” from its technical trials. “So far we’re very encouraged,” he said, adding that the trials still represent a small volume of customers. They need to work through things like self-installation and how to manage distribution.
Government subsidies will come into play, he said, noting that it costs anywhere between two to three times as much to connect a rural subscriber and between 1.5 and two times as much to build a tower in rural America.
“It is an expensive proposition to reach everyone with this technology,” he said. “We're excited, we think in the near term, we've got a pretty good momentum behind the business, certainly 2022 will be a year of kind of testing and scaling and I think there's a lot of upside.”
With some of that upside coming in the form of subsidies from the infrastructure bill, he’s been spending “a fair bit of time” talking to folks in Washington, D.C., about that. “I'm cautiously optimistic that we're going to get that across the goal line but we don't require those subsidies to turn this into a profitable product,” he said.
Meanwhile, UScellular EVP and CTO Michael Irizarry said they’re well into Phase 3 of the 5G buildout. About 35% of its sites are upgraded and they’re seeing “nice traffic” on the sites that have been upgraded. About one-fourth of UScellular’s smartphone subscribers now have 5G capable devices, according to Therivel.
Therivel also said they’re seeing some “really terrific traction” in the tower business, which UScellular is keeping rather than selling as other carriers have done. “It's clear to the industry that we're open for business in towers and we're really seeing the benefit of that approach,” he said.
Here are a few more take-aways from Q3:
- Postpaid handset churn was 0.95% in the quarter, higher than the 0.88% in the year-ago quarter.
- Prepaid net adds were 11,000. UScellular ended the quarter with a total of 4.9 million retail connections, of which 518,000 are prepaid.
- Third-quarter ARPU was $48.12 compared with $47.10 for the same period a year ago. ARPA was $125.99 in Q3 2021 compared with $123.27 in the year-ago quarter.
- Service revenues totaled $788 million, versus $775 million for the same period a year ago. Net income was $34 million compared with $85 million in the same period one year ago.