U.S.
Cellular
TDS’s largest business unit, U.S. Cellular,
is focused on driving growth through attracting
and keeping highly satisfied customers. It accomplishes
this through its excellent quality network, superior
customer service and effective distribution channels.
U.S. Cellular is also strengthening its regional
footprint
and is making its service offerings more differentiated
and attractive by expanding its popular easyedge(SM)
data services.
U.S. Cellular’s customer-satisfaction strategy
continues to be effective in attracting and retaining
quality customers. In 2004, U.S. Cellular added
a record 627,000 net customers, not including divestitures,
an increase of 40 percent over 2003. U.S. Cellular
has attained a post-pay customer churn
rate that is one of the lowest in the wireless
industry. The company’s low churn rate is
also one of its strongest “assets,”
because adding a new customer costs substantially
more than keeping an existing customer satisfied.
U.S. Cellular’s average post-pay churn rate
was only 1.5 percent per month in 2004. This was
the seventh consecutive year that U.S. Cellular
attained a rate below 2 percent, a tremendous record
that results from the company’s passion for
providing outstanding service to customers. The
low churn rate in 2004 is particularly noteworthy
because wireless
number portability was fully implemented in
the middle of the year.
U.S. Cellular’s dramatic growth in customers
drove significant increases in revenues. On a comparable
basis, net of divested properties, U.S. Cellular
grew its service revenues 15 percent over 2003.
During the year, U.S. Cellular completed its three-year
wireless network upgrade initiative—ahead
of schedule and below the original spending plan.
As a result, all U.S. Cellular markets now support
CDMA
1X technology. The 1X technology allows U.S. Cellular
to offer its popular easyedge
data services. Customer take rates for data services
are above expectations, and they have become a strong
source of revenue growth. Data-service revenues
were $67 million for the year 2004 and $23 million
in the last quarter of the year alone. Data take
rates and average per customer data revenue should
continue to grow as U.S. Cellular continues to add
to the data services it offers.
During the year U.S. Cellular added 840 cell sites,
a company record for any year. Network quality measured
internally and through independent drive tests continued
to improve. Many of the added cells were in the
three new markets launched during the year: Oklahoma
City, Okla.; Portland, Maine; and Lincoln, Neb.
These new market launches have gone very well from
the start, with strong customer additions and solid
levels of customer satisfaction.
In the wireless
competitive landscape, we were pleased to see the
long-awaited consolidation of the national wireless
providers begin to take effect with the merger of
Cingular Wireless and AT&T Wireless. The recent
announcement of a planned Sprint-Nextel merger is
another positive development. We have long believed
that consolidation will benefit both consumers and
the industry. Fewer national providers should promote
incentives for investment in service quality and
lessen incentives for uneconomical pricing. U.S.
Cellular is very well situated as a successful regional
carrier with an intense customer focus. The company
competes selectively in areas where its believes
it can win a substantial market share of high-quality
customers.
Also during 2004, U.S. Cellular strengthened its
footprint
by divesting several small operations that were
not important to its ongoing market clusters.
On a more recent note, we were pleased with the
results of the Federal Communications Commission
(FCC)'s Auction 58 in February 2005. U.S. Cellular
is a limited partner in Carroll Wireless L.P., which
participated in the auction and was the successful
bidder for 17 licenses. All the licenses purchased
complement U.S. Cellular's existing footprint.
The momentum created by strong growth in customers
at U.S. Cellular, driven by high customer satisfaction
and low churn,
is continuing into 2005.
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