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To: Johnny Canuck who wrote (36817)	4/23/2002 11:00:10 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68070

Tuesday April 23, 5:05 pm Eastern Time Reuters Business Wireless Firms Report Solid Results By Yukari Iwatani CHICAGO (Reuters) - Wireless telephone companies reported solid results on Tuesday as healthy subscriber growth and strong operating cash flow were taken as signs that the industry was holding up well in the face of the economic slowdown and increasing price competition. ADVERTISEMENT The wireless sector has become a rare bright spot in the otherwise dismal telecoms sector. However, analysts said the broader telecoms gloom may eventually hamstring the sector. ``The difficulties that the wireline guys are having will flow into the wireless guys,'' Frank Marsala, wireless analyst with Robertson Stephens, said. AT&T Wireless Services Inc. (NYSE:AWE - news) and VoiceStream Wireless, the third and sixth-largest national wireless operators respectively, reported higher-than-expected net new customers and operating profit. VoiceStream is a unit of Deutsche Telekom AG (DTEGn.DE). Verizon Wireless, the nation's No. 1 wireless operator, reported a shortfall in net new customers. But analysts said they were still happy with its overall results, especially operating cash flow which handily beat estimates. ``When you look at these numbers, it's really reassuring that wireless carriers are seeing better-than-expected demand. Things have really picked up on a monthly basis, margins are expanding with (capital expenditure) coming down,'' Thomas Lee, wireless analyst with J.P. Morgan, said. ``The operating picture that the carriers thought that they were facing in January has proven to be much better as the quarter progressed,'' he added. APRIL OFF TO STRONG START Verizon Communications, which owns Verizon Wireless jointly with Vodafone Group (VOD.L), said in its earnings conference call that April was off to a strong start and consumer electronics retailer RadioShack Corp. (NYSE:RSH - news) said it was seeing ``excellent'' wireless sales. RadioShack sells Verizon Wireless and Sprint PCS service. Following the reports, the Philadelphia Wireless Telecommunications Index (^YLS - news), the proxy for the sector, rose as high as 65.09 before closing up 0.08 percent at 63.93 and AT&T Wireless' shares rose 84 cents, or 10.4 percent, to close at $8.94. Other wireless firms also traded up in sympathy. Shares of Sprint PCS Group (NYSE:PCS - news) rose 41 cents, or 3.7 percent, to close at $11.60 and Nextel Communications Inc. (NasdaqNM:NXTL - news) closed up 61 cents or 12.9 percent, at $5.35. Sprint PCS and Nextel are the nation's No. 4 and No. 5 wireless companies. Wireless operators were belatedly hit by the weak economy in the fourth quarter, when many companies shocked investors by reporting slower-than-expected subscriber growth following years of frenetic gains. AT&T Wireless stock has dropped 39 percent since the beginning of the year, while the wireless telecoms index has fallen 33 percent in the same period. Analysts and investors for the most part had been expecting the industry to report first-quarter results generally in line with lowered expectations. Tuesday's results follow on the heels of Sprint PCS and Nextel, which reported strong results last week. Cingular Wireless, the nation's second-largest wireless firm, reported lower-than-expected net new customers last Thursday, but gross customer additions were healthy as it gave a positive outlook for the second quarter. LOWER CUSTOMER TURNOVER Both Cingular and Verizon's overall subscriber growth have been hit by a decline in reseller customers, who buy service through non-Cingular or Verizon stores. Analysts said reseller customers were more sensitive to the economy. ``The total numbers were disappointing but I think from my perspective, we were pretty much planning for a large deduction in the growth rate of subscribers,'' Steve Mygrant, fund manager for the Fifth Third Technology Fund, said of Verizon Wireless' results. ``We were pretty happy with the Verizon Wireless part of (Verizon Communications' report),'' he said. Analysts said they were particularly pleased with the companies' efforts to improve operating cash flow or EBITDA (earnings before interest, taxes, depreciation and amortization). Both AT&T Wireless and Verizon Wireless significantly beat analysts' expectations for EBITDA and VoiceStream reported a positive operating cash flow for the quarter. ``The thing that's causing EBITDA to be solid or even in some cases better than expected, is the retention effort that they're making,'' Marsala said, adding that all of the top wireless firms reported lower customer turnover. Lower customer turnover has been considered the main driver for stabilized average monthly revenue per user, which analysts had feared would be lower since pricing competition began heating up in January. Going forward, Mygrant stressed that companies need to focus on alternative customer markets and additional revenue opportunities such as short-text messaging and wireless Internet in order to survive the price pressure and slowing subscriber growth.