JPM on CDMA(prior to VZW blowout results)
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WLNP Positive for CDMA
WLNP appears positive for CDMA carriers.
We believe WLNP (Wireless Local Number Portability) is having more of a positive
impact on CDMA operators in the U.S. than most investors first believed last month.
This trend is evidenced by Sprint PCS' positive pre-announcement in early January,
followed by a strong net add report from ALLTEL (see Table 1 below). PCS
reported net adds of 390k, 133k above JPMorgan wireless analyst
forecast. Churn was also 200 bps below his 2.9% estimate, and flat at 2.7% from
Q303. For ALLTEL, net adds came in 35k above the JPMorgan estimate of 95k,
churn was inline at 2.5%, and post-paid churn reached a four-year low at 1.96%.
Industry-wide churn is not necessarily the best measure of WLNP.
While lower churn at Sprint PCS may appear to imply that WLNP is not having an
impact, we believe that at least in the short term, PCS is a net-gainer of WLNP
churning customers, rather than a net-loser. On the flipside, based on the Q4 results,
shown in Table 1, it appears that AT&T Wireless was a net-loser of WLNP
subscribers as the company fell 157k short on the net add line while seeing churn
spike 600 basis points to 3.3% from 2.7% in Q3. We believe the net effect of WLNP
on the industry will be to migrate unsatisfied subscribers from lower quality
networks to higher quality networks, and therefore, we do not expect to see churn to
increase industry-wide. Nonetheless, handsets sales for the net winners should see a
boost from WLNP in 2004, and in the early going, we believe the CDMA carriers
have taken the lead.
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