Cingular hits 20 million mark

Cingular Wireless reaches a 20 million subscriber milestone, but analysts say that further growth might not come as easy this year for the industry.

2 min read
Cingular Wireless announced Wednesday that it has reached the 20 million subscriber milestone, but further growth might not come as easy this year for the industry.

The news comes as the wireless industry prepares to grapple with an economic downturn that could hit the U.S. economy for at least the first two quarters of the year.

Frank Marsala, an analyst at Jefferies, believes the wireless industry is definitely aware of the risk of an economic slowdown. "Every major wireless company has caveated their 2001 outlook based upon how the U.S. economy performs," he said.

Cingular started in October of 2000 with a total of 19 million U.S. customers as a joint venture between SBC Communications and BellSouth. The company ranks among the top three wireless carriers in the United States.

Verizon Wireless ended last year with 27.5 million customers, and AT&T Wireless reported about 15.2 million customers at the end of the year.

"The wireless industry has never gone through a bad economy as a mature industry," said Peter Friedland, a wireless analyst at WR Hambrecht.

Friedland cites statistics that indicate the wireless industry grabbed about 37 percent of the potential U.S. subscriber market by the end of last year, up about 8 percent from 1999. He says the penetration rate was only about 10 percent during the last recession in the early 1990s.

Both analysts expect the industry to corral another 8 percent of the market in 2001 and add more than 22 million new customers.

"It's still a good number of new customers, but I don't see any upside to that unless the economy improves in the second half of the year," Marsala said.

Analysts can base some cautious optimism on the U.S. market's growth potential by comparing it with the European market, where wireless players have conquered much more of their potential markets.

Friedland noted that even non-Scandinavian countries like Italy and the United Kingdom achieved a penetration rate of 73 percent and 68 percent, respectively, at the end of last year.

Yet competition will be tough even if there are plenty of potential customers. Cingular has managed to significantly grow its subscriber base, but some analysts think that the share of subscribers between the top five wireless players will not change much over the year.

"That order is not going to change unless through consolidation," Friedland said. "All of the top companies are adding customers as aggressively as they can."

At the end of last year, AT&T Wireless grew its customers about 59 percent from the previous year, and Sprint PCS' subscriber numbers jumped 70 percent over the same period.