SBC Communications attributed its service bundling strategy with reversing the loss in UNE-p access lines in its western territory, however the UNE-p losses continue in the Midwest, where the company has just gained approval to offer long distance service. Growth for DSL remained strong in Q3, with a record 365,000 net adds during the quarter. Overall, SBC's quarterly revenue declined to $10.2 billion, compared to $10.6 billion in the year-ago period. Operating expenses totaled $8.6 billion for the third quarter, compared with $8.5 billion in the year-earlier period. EPS was $0.37, compared with $0.51 in the period last year. The company said it had two main strategic goals: stabilize the wireline access trends and put Cingular Wireless back on a sustainable growth trend. Some highlights of the quarter:
- 365,000 net new DSL lines in Q3 bringing total high-speed Internet lines to 3.1 million. Q3 was the company's best-ever DSL net-add quarter and its seventh straight quarter of sequential growth in DSL net adds. In Q2, SBC added 304,000 net DSL lines. SBC's in-service DSL customer mix is 73% consumer, 17% business and 10% wholesale. The percentage of wholesale DSL customers has declined significantly from 18% at this time last year. SBC's DSL penetration in its California territory is now 13.4% and overall penetration is approaching 10%. DSL ARPU is holding steady at $40. SBC said half of its DSL locations are able to get between 4 to 6 Mbps.
- data revenues increased 5.5% to $2.6 billion, led by a 52% increase in DSL revenue. Hi-cap data services grew slightly.
- SBC lost 228,000 non-ISDN business access lines in Q3 compared to a loss of 231,000 lines in Q2.
- SBC lost 607,000 consumer access lines in Q3, compared to a loss of 708,000 access lines in Q2. The losses were greatest in the Midwest, where the company had yet to introduced LD service.
- SBC noted positive wholesale trends for Resale and UNE-p lines. In Q2, SBC lost 321,000 lines to UNE-p competitors, compared to a line loss of 375,000. Significantly, in its southwestern territory, SBC gained back 51,000 lines from UNE-p competitors in Q3, compared to a gain of 45,000 lines in this territory for Q2. SBC said the ability to bundle LD service is decisive in stopping UNE-p competitors.
- Cingular Wireless added 745,000 net subscribers in the quarter. The company said Cingular's GSM/GPRS conversion is ahead of schedule and a 100% conversion is expected by end of the year. Subscriber ARPU is essentially flat.
- Service bundling continues as a major trend: 36% of customers have bundles with one or more key services -- LD, DSL and wireless. The company expects that the launch of SBC DISH satellite TV service early next year will strengthen its position in the consumer market, enabling it to offer an integrated package of wireless, wireline, broadband and video service.
- CAPEX spending has been $3.2 billion for the year to date, compared with $5.0 billion at this point last year.
