August 22, 2005

Merrill Lynch said it expects wireless carriers to post solid revenue growth and sequential margin gains for the third quarter, though the results could fall short of those posted during the second quarter.

"The back-to-school season has become increasingly important over the last few years, highlighting the favorable demographic shift," Merrill Lynch analysts David Janazzo wrote in a research report.

The wireless industry posted more than 5.3 million net customer additions during the third quarter of 2004, which fell short of the nearly 5.6 million customers added during the second quarter of this year, but a strong sequential growth over the 4.7 million customers added during the second quarter of 2004.

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Merrill Lynch noted that it expects churn levels to increase slightly from 1.9 percent during the second quarter to 2 percent in the third quarter.

Janazzo said that based on the strong second-quarter results, continued trends in wireline substitution and increased adoption of data services, the wireless industry can push penetration levels from the current 66 percent level to 85 percent.

Source: RCR News