Tags: US | Earns | US | Cellular

US Cellular Profit Hit by Cost of Smartphones

Friday, 03 August 2012 02:10 PM

U.S. Cellular posted a 30 percent drop in net income for the second quarter Friday, weighed down by hefty costs for the smartphones it sells to subscribers at a loss.

The regional cellphone company net income was $52.7 million, or 62 cents per share, in the April to June period. That compares with $74.9 million, or 88 cents per share, in the same period of 2011.

Revenue rose 3 percent to $1.10 billion from $1.08 billion, as U.S. Cellular boosted the average monthly cellphone bill to $50.99 from $50.52.

Cellphone companies sell smartphones for hundreds of dollars less than they pay for them, hoping to make the money back over time in service fees. Last year, U.S. Cellular turned down the opportunity to sell the iPhone because it was too expensive, with an average price of more than $600. It's the only U.S. phone company known to have turned down the iPhone.

U.S. Cellular saves money up front by not selling the iPhone, but that comes with its own costs. The company lost a record 48,000 subscribers from contract-based plans in the quarter, offset somewhat by a gain of 10,000.

The company ended the quarter with 5.8 million customers, making it the seventh-largest cellphone company in the country.

Shares of U.S. Cellular Corp. fell $1.19, or 2.9 percent, to $39.33 in afternoon trading.

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Friday, 03 August 2012 02:10 PM
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