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AT&T Wireless readies recovery strategy

CEO John Zeglis outlines the troubled wireless carrier's plans to rebound from one of its worst financial quarters ever.

AT&T Wireless plans to open 100 new retail stores and increase staffing at besieged customer call centers to rebound from one of its worst financial quarters ever, company executives said Friday.

The carrier is trying to recover from a financial quarter in which it lost 367,000 subscribers. Meanwhile, its competitors added millions of new customers over the same time period. At the rate the carriers' customers are leaving, it would have 40 percent fewer subscribers by the end of the year.

"We are not proud of our results" over the last three months, AT&T Wireless Chief Executive John Zeglis told financial analysts.

Zeglis blamed the quarter's results on several problems that struck AT&T Wireless around November 2003. At the time, the company was battling a steep increase in the number of customers whose contracts were nearly up but hadn't been renewed, he said. In November, when the "contract bulge" was at its highest, new federal rules went into effect that let cell phone customers switch carriers and keep their old telephone number.

"These customers found it easier to switch carriers than ever before," Zeglis said.

In the last few weeks, the company has "dug itself out of our contract hole," and the number of subscribers signed on are at normal levels, he said. It also has bulked up its call centers, which at one point generated so many complaints they drew a public rebuke from the Federal Communications Commission.

AT&T Wireless also has reacted to the customer attrition by improving network coverage, executives said. The company plans to launch a major advertising campaign soon that highlights the network upgrades. In the ads, the company will ask, "How many bars do you have?" Verizon Wireless uses the phrase "Can you hear me now?" in its advertising.

AT&T Wireless said its new stores will be in "select high-profile locations," but executives didn't disclose additional details. About 44 percent of all the company's business comes from retail outlets.

AT&T Wireless executives expressed confidence that the "very disappointing" quarter will not affect the company's pending sale to Cingular Wireless. Cingular said it is still interested in completing the deal later this year, despite AT&T Wireless' recent lackluster results.

But cell phone industry analysts believe Cingular, and its owners SBC Communications and BellSouth, may lower the $41 billion offer if AT&T Wireless fails to stop the customer losses over the next few financial quarters.

"If this accelerates over the next two or three quarters, Cingular, SBC and BellSouth and their investment firms may revalue the deal," said IDC analyst Keith Waryas.