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Apr. 13, 2009

U.S. wireless carriers offering popular smartphones and comparable pricing are eating into U.S. Cellular’s high-end customers while discount mobile carriers lure away cash-conscious consumers.

And these challenges are now showing up on the company’s balance sheet as well...

Overall, sales growth slowed to 7.5 percent in its third quarter compared with 9.2 percent the previous quarter and 14 percent in 2008.

Additionally, the company’s customer base grew just 1.5 percent, to about 6.2 million last year, after losing customers in its third quarter.

Prepaid wireless carrier MetroPCS recently reported first-quarter net additions of more than 684,000, a 51 percent jump over the same period in 2008. Verizon Wireless blew U.S. Cellular’s miniscule 1.4 percent growth rate in 2008, increasing its customer base about 9 percent on net subscriber additions of 5.8 million.

The first indications of U.S. Cellular’s strategic bolstering came as rumors emerged that the company was taking part in a private auction of Verizon’s Alltel assets. The segments up for grabs cover about 2.1 million people, with coverage concentrated in the states of Idaho, Montana, North Dakota and South Dakota.

It’s not often that these auctions come up, and U.S. Cellular could benefit by snagging a segment in southern Illinois, thereby expanding its footprint in the Chicago region.

Rumors have also appeared on phonearena.com that the company will start sprucing up its line of devices in two weeks with newer offerings that more easily compete with the selection available from national competitors.

Company spokesman Mark Steinkrauss admitted in February that U.S. Cellular was “in a bit of a catch-up mode” when it came to its handset offerings: “We don’t always have the latest and the greatest, but we don’t think that’s a meaningful hindrance to us.”

U.S. Cellular is under shareholder pressure to sell given that the company’s growth rate has slowed to a crawl while other wireless carriers are growing a lot faster. What is surprising is that rumors about new smartphone offerings and a bid on Verizon’s divested Alltel assets seem to indicate the company is defying the odds.

U.S. Cellular could be one of the last regional mobile carriers standing.

If the rumors are true, the carrier could soon update its HTC Touch offering with the HTC Touch Pro. It also could add the Samsung Gloss to its lineup, a major departure from the company’s historically staid line of handset offerings.

While the whisperings about the Verizon auction have been widely circulated, the speculation about the new phone offerings has not. The company has made no formal announcements about the Verizon auction or new phone offerings, and it remains to be seen exactly how accurate the gossip is.

U.S. Cellular had planned to expand its existing EV-DO 3G offerings to about 70 percent of its markets by the end of 2009.

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    This article was featured on Business 5.0 and on Tech Blog.

Source: U.S. Cellular.