Chicago-based carrier, U.S. Cellular, reported third quarter results today. The company missed analyst expectations of earning 23 cents per share by reporting 20 cents. Net income over the quarter was $17 million on revenue of $1.01 billion, a little higher than analyst expectations of $985 million. U.S Cellular's Chief Executive Officer, Ken Meyers, explained in a press statement that he is pleased with the company's financial performance. "We continue to differentiate ourselves through an unwavering commitment to an exceptional customer experience, including a high-quality network and outstanding customer service." The company did, however, report a drop of 6,000 post-paid lines and blamed this in part to the fail of the Samsung Galaxy Note 7 and limited stock of the new Apple iPhone 7. However, U.S. Cellular is relatively relaxed about this small decline in postpaid lines.
Following the announcement, U.S. Cellular's stock price gained slightly, but it was the prepaid sales side of the business that helped matters. As with much of the cell 'phone market, U.S. Cellular has witnessed the ARPU gap between prepaid and postpaid customers narrow. ARPU stands for Average Revenue Per User and traditionally, postpaid customers generate more revenue (and hence profits) for a cellular operator. However, in recent years the revenue generated by postpaid customers has declined because of intense competition pushing pricing down: in short, businesses are having to either offer more to customers for the same money, reduce prices or in many cases, combine the two. Compared with the third quarter 2015, U.S. Cellular has seen a small decline in prepaid ARPU from $35.64 to $34.39 and for postpaid, down from $58.12 to $47.08. This is also supported by U.S. Cellular enjoying a strong performance from the prepaid market, where the company reported a gain of 67,000 customers bringing the total to 480,000.
U.S. Cellular's Chief Executive explained that he is currently assessing how big a shift the company is experiencing when it comes to customers' buying habits and prepay service. He explained that during the early years of prepaid service, the product was expensive and offered poor value. However, over the years, prepaid service has evolved: today's prepaid service offers similar benefits and pricing as compared with the postpaid service deals but is packaged differently. U.S. Cellular is focusing on those prepaid customers willing to spend more on their service and is squaring up to competitors such as MetroPCS and Cricket.