Subscriber Numbers Bode Well for Openwave and InfoSpace
epoch.com
By Matt Adams
Vice President, Analyst
Wireless carriers are pre-releasing December subscriber numbers and the results have been positive for wireless data companies. These subscriber numbers are significant to both OpenWave and InfoSpace since they generate wireless revenues based on the number of carrier subscribers that use their data services. Both of these companies' largest customers (KDDI for OpenWave, Verizon for InfoSpace) have released strong fourth quarter wireless data subscriber counts in the past week. These trends coupled with yesterday's Sprint PCS announcement bode well for the wireless data service industry and contradict investor fears of a slowdown in wireless data activations.
Japan wireless carrier KDDI passed the 5 million wireless data subscriber mark this week, up from 3.5 million at the end of September. KDDI is Openwave's largest customer accounting for approximately 40% of its active subscribers. According to Openwave CFO Alan Black during a presentation yesterday, KDDI is adding wireless data subs at a rate of 20,000 per day, up from 10,000 per day in the September quarter. All the new KDDI subscribers may not count towards Openwave's 4Q00 active subscriber count, due to revenue recognition policies, but the news adds comfort to our 4Q00 estimate for 1.9 million new active Openwave subscribers and period end total of 8.8 million.
Openwave's numbers look even better after these announcements from Sprint PCS and Verizon Wireless. Sprint PCS reported that its wireless Web service subscribers reached the 1 million mark, up from 400,000 at last count in September. For Openwave, the more relevant number from the Sprint release is its Wireless Web subscribers that pay monthly service fees. Sprint's total data numbers include "casual users" that do not subscribe for data service but pay for access on a per minute basis. Sprint's Wireless Web data users numbered 500,000 at the end of December, up from 320,000 at the end of September.
Verizon revealed last week that fourth quarter data subscribers increased to 750,000 from 500,000 at the end of September. Verizon segments its subscribers by the network, CDMA (code divison multiple access) or CDPD (cellular digital packet delivery) network. Verizon sells its CDMA data service to wireless phone users, while the CDPD services are sold to subscribers that have a PDA or wireless lap top. Therefore the CDMA subscriber count is relevant to companies like InfoSpace and Openwave. Verizon had 400,000 CDMA subscribers and 100,000 CDPD subscribers at the end of October. The company did not provide a breakdown of data subs for the fourth quarter. If we assume that the number of Verizon CDMA subscribers as percent of total Verizon subscribers remains constant at 80%, this translates into 200,000 new Verizon CDMA subscribers added in the fourth qaurter.
The combined estimated increase of 380,000 data subscribers from Sprint PCS and Verizon Wireless represents approximately a quarter of our projected increase for Openwave for the fourth quarter. These numbers, plus the good news from KDDI, give us confidence that the company will beat our projected increase of 1.9 million active subs in the fourth quarter. Openwave reports fiscal second quarter earnings on January 22 after the market close.
For InfoSpace the news looks good as well since Verizon Wireless is InfoSpace's largest wireless customer. Verizon's 400,000 CDMA wireless data subscribers at the end of September accounted for approximately 50% of InfoSpace's wireless customers. Verizon uses InfoSpace's wireless content and information services along with OpenWave's WAP gateway server, making it a customer of both companies. Sprint PCS uses InfoSpace's directory services but does not pay InfoSpace on per subscriber basis and therefore is not included in its subscriber counts.
If we assume that 200,000 of Verizon's new data subscribers are CDMA subs, Verizon's fourth quarter increase represents 44% of our estimated increase for InfoSpace of 450,000 data subscribers. This news cements our confidence that InfoSpace will meet management's year end goal of 1 million wireless subscribers and our estimate for 1.289 million subscribers. The other key carrier for InfoSpace is AT&T Wireless, which has yet to report its year end wireless data numbers. InfoSpace will report its fourth quarter earnings on January 29 after the market close. |
