iPCS Inc. Q1 2008 Earnings Call Transcript

iPCS Inc. (IPCS)

Q1 2008 Earnings Call

May 7, 2008 11:00 am ET

Executives

Michael Polyviou - Financial Dynamics, IR

Tim Yager - President and CEO

Steb Chandor - EVP and CFO

Conrad Hunter - EVP and COO

Analysts

Charlie Casitas - Raymond James

Ana Goshko - Banc of America

Jon Schildkraut - Jefferies

Derek Derina - SB Funds

Rob Hopper - UBS

Presentation

Operator

Good morning. My name is Sheryl, and I will be your conference operator today. At this time, I would like to welcome everyone to the iPCS First Quarter 2008 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions)

Thank you. It is now my pleasure to turn the floor over to Michael. Sir, you may begin your conference.

Michael Polyviou

Thank you, Sheryl, and good morning, everyone. Thanks for joining us to discuss iPCS's results for the first quarter ended March 31, 2008, which were announced in the press release issued yesterday evening. If you do not have a copy of iPCS's press release or presentation, a copy could be found on the Company's website at ww.IPCSwirelessInc.com.

Please note that a replay of the call will be made available later today. The details were set forth in the press release. Before I turn the call over to Tim Yager, President and CEO, I have a few housekeeping matters to go over.

Let me remind everyone that management's discussion this morning will likely contain forward-looking statements. Which statements often include words like, believes, expects, plans, states, intents, projects, estimates, may, might, would, or similar words. Such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, and are made based on management's current expectations or beliefs, as well as, assumptions made by and information currently available to management. A variety of factors could cause actual results to differ materially from those anticipated in iPCS's forward-looking statements.

For a detailed discussion of these factors and other cautionary statements that could cause actual results to differ from those described in management's discussion, please refer to iPCS's filings with the SEC, particularly the Risk Factor section of iPCS's annual report on Form 10-K, as such sections may have been updated in its subsequent filings with the SEC. Investors and analysts should not place undue reliance on forward-looking statements. In addition, management will discuss certain non-GAAP financial measures. Please refer to the iPCS's press release for a reconciliation of these non-GAAP financial measures, to figures derived using GAAP.

Now I would like to turn the call over to Tim Yager, President and CEO of iPCS.

Tim Yager

Thank you, Michael. I'd like to welcome everyone to our earnings call, this morning. I'm joined today by Steb Chandor, our Executive Vice President and Chief Financial Officer, and Conrad Hunter, our Executive Vice President and Chief Operating Officer. I am pleased to report that 2008 is off to a great start.

We struck a new deal with Sprint in early March that provides improved economics to our business, had our Illinois ruling upheld unanimously by the Illinois Appellate Court in late March and increased our EBITDA from the year-ago period by over 100%. To begin, for the quarter we reported adjusted EBITDA of $23 million, after adding back $300,000 of Sprint/Nextel litigation. This is up from the similarly adjusted EBITDA in 2007 of $9.8 million.

We are reaffirming our previously announced full year 2008 guidance. Although, as a result of the improvements made in EBITDA during the first quarter, and the improved visibility to our operations from our recent amendments with Sprint, we believe that we will end the year towards the high end of our adjusted EBITDA guidance of $95 million to $105 million.

Additionally, we expect that our 2009 adjusted EBITDA growth will be at or above 20%. We believe that we are beginning to see the scaled benefits of our business translate into better EBITDA growth for the future. As we previously announced, iPCS had approximately 59,200 gross additions during the quarter, compared to 75,700 from the prior year quarter.

So lower gross adds were expected, and we were pleased that churn came in lower than expected, resulting in net additions of approximately 10,700 which churned at 2.3%. As we previously stated, we tightened our credit scoring during the fourth quarter last year which contributed to lower gross adds this quarter as compared to the prior year quarter, particularly in some of Sprint-controlled channels.

Our ending sub-base at the end of the first quarter was 80% prime, up from 74% prime in the year ago period. We believe the tightening of our credit scoring will have positive impacts on churn, as we move forward throughout 2008.

We also believe the tightening of our credit scoring will begin to improve our bad debt expense, which is still at levels that are not satisfactory. While we recognize there will be a tail to bad debt, we feel the initiatives we started late last year will begin to improve the bad debt in the second half of 2008.

Our network continues to perform very well. We are spending significant capital this year to further expand our network footprint and capacity. We expect to have 6 million pops covered with EVDO rev A by the end of the third quarter.

As a reminder, this will provide for an additional $0.15 reduction to our Sprint CCPU fee, taking the CCPU rate to $6.35 per subscriber from our current rate of $6.50. We are also finalizing our plans to get to 7 million EVDO rev A covered pops, and will provide further comment on the timing of incremental EVDO pops on a future call. The Company will assume an additional $0.15 reduction to our CCPU when we get to 7 million EVDO-covered pops.

Additionally, we are building out our network on the Grand Rapids market to match the IDA network, so that we can be in a position to launch Q-Chat when we are ready. We believe this is an upside to our current business plan. As you can see we have a number of reasons to be excited for 2008.

EBITDA growth will continue to be a primary focus for the business, going forward. We will continue to invest in our network, to help accelerate that growth. We will also continue to focus on operations including ARPU, churn and net additions to drive the business.

I would now like to turn the call over to Conrad, to provide additional detail on the operations of the business. Conrad?

Conrad Hunter

Thank you, Tim. I am pleased to be on the call today to provide some color on the company's operations. As you've already heard from Tim, we had a successful first quarter, due to improvements in several parts of the business. Our new agreement with Sprint has eliminated many of our associate distractions.

Our improved relationship has allowed us to take advantage of many of the customer-satisfaction programs Sprint has implemented, in conjunction with those changes we have made progress in the development of our frontline leaders, and have added some significant bench strength in several of our key markets.

During the first quarter, we began our process to consolidate our sales operations team to Schaumburg headquarters location, to improve the overall effectiveness and efficiency of this team, and to make sure it was completely focused on supporting all channels of distribution.

Our new agreements with Sprint required us to focus very quickly on a plan to convert to Sprint's new billing and customer care platform called Ensemble beginning in mid-March. Our first conversion, of several so far, included over 400,000 customers, which we successfully transitioned with only minor issues, mostly related to back-office processes and some care support functionality.

Sprint and our team have worked quickly to minimize the impact on our customer satisfaction. Ensemble gives us improved capability to better serve the customer, and allows Sprint customer care to execute much more effectively, with one-call resolution for our customers. It allows us to participate in several customer satisfaction programs designed to touch new customers often in the first 120 days of their service commitment.

We believe these programs will have a positive impact on both voluntary and involuntary churn, as we continue throughout the year. Although the migration of our entire subscriber base is not yet complete and additional issues may arise, we are pleased to have this conversion underway, and expect to have our remaining subscribers migrated by the end of second quarter.

On our last call, I spoke about the fact that we were going to launch a more customer-friendly retail store design, referred to as Gemini. In the first quarter, we completed two of these new prototype stores, and we've had good success in both of these locations. We intend to build 3 to 5 new Gemini formatted stores by the end of this year.

We are encouraged by the new opportunities this design affords us in addressing the small business segment, and in more aggressively demonstrating the power of Sprint speed through our data card displays. We have identified 7 to 10 existing company owned retail locations that we will upgrade to the Gemini format by the end of third quarter. We believe this will improve our customers experience at the point of sale, improve our mix of prime customers, and continue to lower churn, overtime.

We ended the quarter with 43 company owned stores and 100 exclusively branded Sprint dealers. As Tim said, we stayed the course in the first quarter in maintaining tighter credit standards to improve our mix of prime to sub-prime customers. And we experienced improvement in the percent of our ending prime customers, as Tim has already mentioned.

Virgin Mobile prepaid continues to make progress in our distribution sales strategy and with our new Sprint terms, we expect to have a prepaid product for the fourth quarter selling season. We have maintained our focus on using our control distribution as a point of service, with the goal of providing the best customer experience at the point of sale, to ensure a sticky customer.

So let me spend a few minutes to highlight some of the things we've accomplished so far this year. First, we maintained our emphasis on sales leadership development within our stores, and have implemented daily leadership huddles with all associates, to focus on productive habits and behaviors, to optimize customer satisfaction and sell value.

We launched Sprint's "Simply Everything" plan, and we are pleased with the customer interest in this offering, and the traction it is gaining. We launched new TV advertising in a couple of our key markets, and initial feedback is positive on the part of our distribution channels, and the customer response is encouraging.

This new approach for us has focused on Simply Everything, and text/data-centric handset. We initiated good, better and best handset offer strategy in all our new marketing communications, and moved our instant rebates to plans with higher targeted individual and family MRC. ARPU for the quarter is not where we had expected, and is being intensely addressed by the team.

Beginning late in the quarter, we initiated several changes to improve our ARPU for the remainder of the year. A few of these included a review of our process involving giving customer credits, targeting customers to make sure they were on the right service plans, and making changes to our compensation plans designed to drive more sales of additional features. We also intend to take advantage of the recent agreements with Sprint, to purse higher ARPU air-card and Smart-Phone sales, especially later in 2008, to help stabilize and grow ARPU.

Finally, on the network operations side of our business, we have launched a very aggressive network build plan for 2008. As a matter of review, 2008 is going to be a transformational year for iPCS, in terms of increasing our coverage for both VoIP and high-speed data in our key markets. And we are well underway to build between, 160 to 180 new sales sites this year.

We expect to have approximately 75 of these new sites on air by the end of second quarter, with the remaining build close to completion prior to the start of the fourth quarter.

On the EVDO rev A deployment, we expect to have over 6 million pops covered by the end of September. This will position us well in regards to our Sprint CCPU discount and in dramatically improving our customers' experience when using their data cards or rev A-capable phones. We believe we'll have best-in-class voice network parity in the Grand Rapids area, and a couple other key markets, by the end of third quarter.

Our improved network capacity and coverage will allow us to launch the new Direct-Connect Q-Chat service when available, enabling us to capture a larger share of the small-to-medium service industry business, along with other traditional trade segments. We intend to initially launch this service in Grand Rapids. We will have a couple of markets ready to launch in a similar timeframe after we have had time to fully assimilate learnings from our Grand Rapids success.

We believe we will see improvements in our ARPU and churn, due to the improved voice and data coverage, as customers will now be able to use their devices more seamlessly, and our footprint and the experience will be significantly better, and we believe will reduce calls into customer care. Our expanded EVDO rev A coverage will give us a competitive advantage in selling data cards, and improving the overall customer experience with premium and mobile broadband applications.

We expect to see an increase in the number of data handset devices being sold, example, the Palm Centro and the Blackberry Pearl, as a result of our EVDO coverage and as momentum is gained with Simply Everything. We continue to believe the strength of our network will assist us in attracting switchers and improving our customer's loyalty to the Sprint brand, as we are able to take full advantage of Sprint speed.

Our goal remains to improve our leadership team, pursue profitable growth and customer satisfaction. We believe these initiatives will allow us to compete more effectively, through our plans for significant network build, our customer service strategy and a focus on leadership.

We expect to improve our customer's experience, leading to higher ARPUs and lower churn, improving the morale of our associates, while at the same time improving the profitability of our business. I am very excited about the prospects for iPCS for the remainder of the year, and look forward to working with our team to deliver on our business objectives.

I'd now like to turn the call over to Steb for a look at our financials.

Steb Chandor

Thanks, Conrad. iPCS ended the quarter with 640,600 subscribers, and a covered pop penetration rate of approximately 5.3%, representing a year-over-year growth of 8% in our ending subscriber base. We ended the first quarter with approximately 245,000 reseller subscribers in our territory, down slightly from 250,000 at the end of 2007.

Gross additions for the first quarter of 2008 were 59,200 down significantly as expected, from the 75,700 for the first quarter of 2007. As Tim mentioned, the majority of the drop was from national third parties such as RadioShack, and other Sprint-controlled distribution channels. Gross additions for our own retail stores and exclusive branded dealers were relatively flat, compared to the prior year quarter. We remain comfortable with our guidance of between 250,000 to 280,000 gross additions for the full year.

Our churn net of 30 day deactivations for the quarter was 2.3%. Flat from the year ago period and down from 2.7 in the fourth quarter. Voluntary churn in the quarter was our lowest rate in years, and was complemented by a drop in the involuntary churn from the fourth quarter. However, we continue to expect that involuntary churn will remain above year earlier levels into 2008, based on general weakness in the economy, and as we work through our higher risk subscribers that we added through the middle of the fourth quarter of last year.

Total revenue for the quarter was $125.7 million, compared to $120.9 million for the prior year quarter. However, it is important to note that beginning on January 1st of this year, and per the terms of our amended agreements with Sprint we no longer receive revenue from Sprint for 3G data roaming. Adjusting this revenue out, 2007 pro forma total revenues would have been $114.3 million, and therefore, 2008 first quarter revenue represented a year-over-year increase of 10%, based on the strength of growing subscriber revenue and voice roaming revenue.

ARPU excluding roaming for the quarter was $48, down from $49 in both the fourth quarter of last year and the year earlier quarter. Declines in data ARPU was flat from the fourth quarter and the year ago quarter at $11. Total ARPU which includes roaming was $64 for the quarter, compared to $68 in the year earlier quarter. This decrease primarily reflects the elimination of data roaming revenue I previously mentioned, which contributed approximately $4 of the year ago ARPU.

For the March quarter, cash cost per user or CCPU excluding roaming and litigation expense was $31, compared to the prior year quarter, CCPU was down $2. Bad debt for the quarter was $5.4 million up from $2.7 million in the prior year quarter, and $4.7 million in the fourth quarter. Our current period results reflect the negative effects of the addition of certain sub-prime credit class subscribers during 2007.

We expect that out bad debt will improve as we move through 2008, as we tightened our credit policies late last year, as previously mentioned, to reduce our exposure to these credit challenged subscribers. Total CCPU which includes roaming was $40 for the quarter, down from $47 in the prior year quarter. The year-over-year decrease primarily reflects the elimination of data roaming expense we pay Sprint, which contributed approximately $6 of the year ago CCPU.

Our roaming ratio with Sprint which no longer includes any 3G data roaming was 1.6 to 1 for the quarter. This is up materially from the 1.2 to 1 we reported in the prior year quarter. This marks the third straight quarter that a ratio increased year-over-year reversing a trend over the prior few years of year-over-year decreases. As was the case in the second half of last year, the improved ratio primarily reflected stronger growth in revenue, as compared to expense, and we feel that this is driven by the increased CDMA customer base in Sprint's territory.

In addition, as we further enhance our network coverage as Conrad outlined, we hope to see the benefits of more roaming revenue and lower roaming expense. Our cost of subscriber acquisition or CPGA for the quarter was $399, up from the prior year period of $371. The increase reflected a higher fixed cost component of CPGA, although fixed CPGA expenses were relatively flat, the reduction in gross additions compared to the prior year quarter pushed up the per gross addition cost.

Our adjusted EBITDA for the quarter was $23 million after adding back $300,000 in Sprint/Nextel litigation expenses. This compares to $9.8 million on a similarly adjusted basis for the first quarter of '07. This improvement reflects a number of positive variables including the higher Sprint roaming margin, lower gross additions for the quarter, and operating leverage in the business.

Lastly, the results include the improved economics as a result of our March amendments with Sprint. Capital expenditures for the first quarter totaled $14.4 million compared to $7.3 million in the year ago quarter.

Turning to the balance sheet, we had approximately $74 million in cash at the end of the quarter. Our long-term obligations mature in 2013 and 2014. With respect to guidance, we are reaffirming our full year 2008 guidance, specifically, gross additions of between $250,000 and $280,000, adjusted EBITDA excluding expenses related to the Sprint/Nextel litigation of between $95 million and $105 million, capital expenditures of between $60 and $65 million.

Now I'll turn the call back to Tim. Tim?

Tim Yager

Thanks, Steb. Before I turn the call over for the question-and-answer session, I would like to address our relationship with Sprint.

As we've previously announced, we are pleased that the Appellate Court, Illinois, unanimously affirmed the lower court's decision that Sprint must cease owning, operating, and managing, the IDA network in iPCS wireless territory. On Monday, May 5th, Sprint petitioned the Illinois Supreme Court for Leave to Appeal. Simply put, Sprint is asking the Illinois Supreme Court for permission to appeal, unlike Sprint's previous appeal, which was automatic the Illinois Supreme Court must grant Sprint permission to appeal.

The trial court's order is still stayed, pending the conclusion of the appeals process. Every year, the Illinois Supreme Court receives thousands of petitions for appeal, and only grants a small percentage of cases to move forward. We continue to believe that this case was properly decided at the trial court level, and unanimously by the Appellate Court.

We hope the Illinois Supreme Court denies Sprint's request for appeal, and plan to file with the court a response to Sprint's petition in the coming days. Due to the summer recess we do not expect the Supreme Court to make their decision to accept or reject Sprint's petition until fall. If the Supreme Court rejects Sprint's petition for appeal, it is our expectation that the clock will start on a 180 day period for Sprint to cease owning, operating and managing the IDA assets in iPCS Wireless' territory, soon thereafter.

If the Illinois Supreme Court grants Sprint's petition, there will be another Appellate process before the Supreme Court, similar to our recently concluded process before the Appellate Court. We continue to believe that Sprint has violated agreements, and will aggressively fight to maintain our exclusivity. Beyond the legal battles, I'm pleased to report that our amended relationship with Sprint that we signed in March is working well.

As Conrad said, we have nearly completed the migration on Ensemble, and despite the expected operational issues, the transition is going well. We are benefiting from the lower CCPU rates effective as of January 1st, and are pleased to have certainty to our travel rates and CCPU rates through 2010. We plan to have 6 million covered pops before the end of the third quarter resulting in an additional reduction to our CCPU charge of $0.15.

In closing, we feel we're off to an excellent start in 2008. We have lowered our costs, provided more predictability to our business, successfully defended Sprint's appeal to our victory in Illinois, and substantially improved our EBITDA year-over-year. We look forward to updating you on the progress in the coming quarters.

I'd now like to turn the call over for the q-and-a portion of the call. Sheryl?

Question-and-Answer Session

Operator

(Operator Instructions). You first question is coming from Ric Prentiss of Raymond James.

Charlie Casitas - Raymond James

Hi, this is Charlie [Casitas], sitting in for Ric. Just to start, have you guys actually been able to like actually test Q-chat on your network?

Tim Yager

At this point, we have not tested Q-Chat specifically on our network. Our network folks are in constant dialogue with Sprint about the progress they're making on Q-Chat. As I said in my prepared remarks, we are building out our footprint in Grand Rapids, to match the IDA footprint, so we can be in a position to launch Q-Chat. Everything we're hearing is positive, and we're looking to be able to launch that service.

Charlie Casitas - Raymond James

Could you tell us like what other markets you're looking to after Grand Rapids?

Tim Yager

Yes, Charlie. We're not going to disclose that, right now. We certainly have several other markets that we're focused on, and we're working toward. But we're not going to disclose that on the call.

Charlie Casitas - Raymond James

One last question, do you have any at least any picture on when you'll be able to offer Boost?

Tim Yager

No. As we said we plan to, we hope to be in a position to offer a prepaid offering by the fourth quarter. We have a couple of months for the agreement, to try to negotiate an agreement to be able to launch Boost in our territory on the CDMA network.

That obviously would probably be our first choice, because it would be simple. If that doesn't work out, then we have the freedom to go secure our own prepaid offering, and we'll go that route. So the only guidance we've given thus far is that we hope to have it up for the fourth quarter.

Operator

Thank you. Your next question is coming from Ana Goshko of Banc of America.

Tim Yager

Hi, Ana.

Ana Goshko - Banc of America

Hi. Thanks very much for taking the question. On Ensemble, so it sounds like you guys are pretty well down the road in getting migrated, but it was pretty recent. Is there any early results you're seeing on having an easier time selling in the national retailer chains as a result, I know that, you've said in the past that that was hindering you in RadioShack channel, for example and other retailers?

Tim Yager

Yes, Ana, this is Tim. Preliminarily, it seems to be improving our ability to sell through those national channels. It's a little too early to call it a trend, at this point. But as we said on the last couple of calls, we didn't really feel that that was impeding our success in some of the national boxes, and we are starting to see the reversal of some of those trends.

Ana Goshko - Banc of America

Okay. Second question is on the new store design. Could you just give us some more details on what this design is, and what you're doing differently? And then maybe part of the question also is on the data cards.

I know that you were kind of restraining the sales of those because of the high cost of the data roaming charge, which is now dropped. So what are you really doing differently, in terms of promoting the data cards, versus what you were doing when you were not being as aggressive?

Tim Yager

Sure, Ana. I'll take the first part of that on the data card. Then I'll let Conrad address the store layouts. On the data card sales, it's a situation where we just weren't promoting the data cards as aggressively as we would have liked, and we just weren't facilitating that process. So now that we have our agreement with Sprint, it certainly frees us to be much more aggressive on promoting the data cards.

Our B2B reps are much more aggressive in promoting it on sales type visits. And also, we're just promoting it much more heavily in our own retail stores. And Conrad will address that a little bit in the Gemini comments, because that's one of the advantages of Gemini, its data capabilities. So Conrad, do you want to touch on the new format?

Conrad Hunter

Yes. I'll do that, Tim. Thank you. Basically, the new store format really allows for more intimate customer experience. And unless you see one, it's hard to explain that. But just provides for much improved customer interaction, more privacy. Secondly, the new store design really allows us to highlight the small business segment of our market as far as the features and services that Sprint has available for them.

And thirdly, it allows us to display in a much more hands-on, user friendly manner, how you can use your wireless data cards or other EVDO rev A based functions or applications. So it's just a much better customer experience when you walk in the door.

Ana Goshko - Banc of America

Okay. Well hopefully, you'll share some of those insights with Sprint and their store designs. So a final question is I believe it was in the press release that you issued when you pre released the preliminary subscriber results. You made a comment in that press release that you were seeing a good momentum from the programs at Sprint. I'm wondering what you were referring to when you talked about the programs at Sprint?

Tim Yager

Sure, Ana. I think what we were referring to there is, one of our frustrations prior to getting on the Ensemble is we weren't able to leverage some of Sprint's own programs that they have in place to touch the customer, in a sense. And now that we're on Ensemble, for instance, our new gross adds, all those customers are being touched a couple of times within the first 120 days of being activated. So those are the kind of things we were talking to.

And as we've gotten migrated over to Ensemble, we're starting to see that those customer touches are improving significantly, at least in terms of the numbers of those. And we think that long-term, that's going to provide benefits to our churn.

Ana Goshko - Banc of America

Okay and then just one more. Just in the last couple of months, as there's been new leadership at Sprint. Have you seen or felt sort of any change in Sprint, in the way that they are handling customer service or dealing with customers or anything either on the customer care side or on the selling side that is materially different from what you've experienced in the past?

Tim Yager

Ana, I'm not going to comment on the specifics, that's a better question for Sprint. I will just make this comment from a high level which is, I've been dealing with Sprint since, really '99. I've never seen the level of focus that they're giving to the customer right now, in my nearly 10 year history with Sprint. And so I'm encouraged.

It sounds like Dan Hesse is doing the right things. He's really focused on the customer, a lot of the dialogue that we hear is customer focused, and that's very encouraging for us as an affiliate. We've always been very customer focused, and it's nice to have that support from our partner that they're starting to feel that focus, as well.

Ana Goshko - Banc of America

Okay. That's good to hear. Thanks very much.

Tim Yager

Thanks, Ana.

Operator

Thank you. Your next question is coming from Jon Schildkraut of Jefferies.

Jon Schildkraut - Jefferies

Good morning, guys. Thanks for taking the questions. A couple of housekeeping items and a couple of strategy questions, here. First I think talk about the roaming side of the business. If you can give us the roaming MOUs for the quarter, that'd be real helpful?

Additionally, you talked about some of the interactions between the 3G roaming revenues last year versus this year. Over the course of last year we did see a very strong increase in roaming revenues. How much of that over the course of the year, as we look out over the course of this year, is related to seeing growth on the roaming data side? And could you give us a way of thinking about what this year might look like?

Tim Yager

Yes, Jonathan, I'll let Steb cover the roaming MOUs in the second part of your second question. But I think at the end of the day, just as a reminder to make sure everyone's on the same page. With the recent agreement we signed with Sprint in March, we no longer settled separately for data roaming between iPCS and Sprint, both on the revenue side. So when a Sprint customer roams on our network, we're not getting those revenues. And then also, when one of our data customers roams onto Sprint's network, we're not paying Sprint for that network.

So that's the component that we're talking to. And certainly, it was a growing revenue piece for us last year. But the expenses were also growing dramatically last year. So we still think that the trade we made was a very positive trade for the company. We think, the answer I gave on a previous question about being able to really increase our data card sales and some of those things really more than offset the loss of those revenues, especially when you think of it in terms of a net revenue number.

And as you called just as a refresher, we did have an ongoing dispute with Sprint, as it relates to our data. About how we were managing some of the customers located in our territory. And I think in our K that we filed we had pretty heavy disclosure in there that, if depending on the outcome of that dispute with Sprint, frankly, we wouldn't have had. It would've been a very close to breakeven on the data margin for our ratio with Sprint.

So I think all things being equal, we're thrilled with the decision we made to redo the deal with Sprint, despite the lowering of the revenues. Again, I don't want anyone to lose sight of the fact that our expenses are dropping precipitously, as well. Steb, do you want to provide any more commentary on the roaming minutes and anything else I missed on the 3G?

Steb Chandor

Yes, just real quickly. On the roaming minutes for the quarter, they're about a half a billion. Not surprisingly, they're seasonally down from the fourth quarter a little bit. But sort of 10% to 15% above what it was in the first quarter of last year, which is consistent with the trend we've seen in the last couple of quarters.

Jon Schildkraut - Jefferies

All right, great. Nonetheless Tim, in regards to your commentary, I'm still trying to get an understanding of how big the data revenue is, and if you want to, you can give me the data cost as well, scaled through the course of the year. I mean you've given us a total number. Surely that was broken out with some explanation in the 10-K.

But as it rolls through the quarters, we're trying to get a sense as to what was roaming growth that had to do with 2G data and MOUs versus growth last year that occurred due to the no longer build for data revenues, as well as the, look into cost on a similar basis?

Tim Yager

Sure. I think Steb's got that for you.

Steb Chandor

Yes, you're right. We've got some information in the K for the full year 2007. In the Q we'll be filing here later today or tomorrow, we'll have the information on what 2007 would have looked like, if we had not settled separately our 3G data. The round numbers are this, that our data roaming revenue in the first quarter of last year was about $6.6 million, and our data roaming expense in the first quarter of last year was about $8.3 million. So those are numbers that we're putting into our document that we'll be filing later today.

Jon Schildkraut - Jefferies

Is that inclusive or exclusive of 2G data?

Steb Chandor

That's exclusive. 2G data is wrapped up in the MOU.

Jon Schildkraut - Jefferies

Okay.

Steb Chandor

So it's really data versus voice, we no longer settle data separately.

Jon Schildkraut - Jefferies

All right, great. Did you say that CapEx in the quarter was $14.4 million?

Steb Chandor

That is correct.

Jon Schildkraut - Jefferies

Okay. In terms of reseller revenues, subscriber counts, could you give us a little look into the reseller side of the business, first of all I would like the revenue number? You had a bit of a down quarter in terms of the reseller subs, nothing to really raise an eyebrow to. But I'd like to get a sense as to what percent really came from Virgin Mobile?

I thought that it was the large majority if not the entirety of your reseller base was out of Virgin, as opposed to Qwest. And if any of our base does come from Qwest, I would like to get a sense of that given Qwest's new agreement with Verizon Wireless?

Tim Yager

Sure, Jonathan, kind of the high level. Virgin Mobile does make up without question, the vast majority of our reseller subs. We do have some Qwest subscribers, as well as Embarq subscribers, but Virgin is by far and away the largest, there. And it is not uncommon for us to have a seasonal dip in the first quarter, in terms of reseller subs. I think Steb, has got the revenue detail for you.

Steb Chandor

Yes. The reseller revenue in the first quarter was about $4 million, which was about what it was last year at $4.1 million.

Jon Schildkraut - Jefferies

Okay, great. In terms of walking through your results for the quarter, one of the things we noticed is that there was a fairly large drop off in D&A, I guess largely due to a decrease in amortization costs. I'm wondering if the levels that we saw in this quarter are the right levels to kind of grow forward from, or alternatively there was an offset in the quarter and that the trends that were coming out of 2007 are the right ones to look at?

Steb Chandor

Yes. During 2007, we finished the amortization of all the customer bases that we acquired and coming out of bankruptcy at iPCS. So the numbers you see going forward are related to mostly our contract to provide service with Sprint over the multi-years. So that's all disclosed in the Q, and the first quarter number is more indicative of what we'll see going forward.

Jon Schildkraut - Jefferies

All right. Final question, what was the data ARPU in the quarter?

Steb Chandor

Data ARPU for the quarter was a little over $11.

Jon Schildkraut - Jefferies

Thanks a lot, guys. Really appreciate it.

Tim Yager

Thanks, Jonathan.

Operator

Thank you. Your next question is coming from Derek [Derina] of SB Funds.

Derek Derina - SB Funds

Hey, guys. Very solid quarter. Congrats.

Tim Yager

Thank you.

Derek Derina - SB Funds

I was a little surprised actually, that you guys didn't have any prepared remarks, given that Sprint this morning came out with an announcement around a WiMax JV, which seems to me to clearly violate the Sprint affiliate agreement. You guys have been talking about better relations with Sprint. But yet, here they are after losing the litigation on the IDN stuff, about to break the agreement again with this WiMax deal.

So I was curious what your comments were in regard to that? And also, is there any reason why iPCS would not file an injunction to block the Sprint WiMax JV from happening? If memory serves, we did that with the Nextel merger. But in hindsight, perhaps not ideally entered into a forbearance agreement, which I'm assuming we want to do this time. But those are sort of the issues I was more interested in?

Tim Yager

Sure, Derek. As it relates to the Clearwire and WiMax announcement, I think it's, obviously, that's to your point hot off the presses this morning. We're not going to comment directly on that, other than just making the blanket statements that I did make in my prepared remarks, that, we continue to believe we have exclusivity to our territory.

We think that the courts have upheld that exclusivity. And we will continue to do everything that we need to do to successfully defend our exclusive rights to provide service in our territory. I think we've established a pretty strong track record of being aggressive in defending those rights and we will continue to do so.

Derek Derina - SB Funds

Fair enough. Well, maybe you can clarify a little bit of timing going back to the earlier comments about the spring recess? When does the court actually go into recess? And do you know for sure whether or not they will or won't decide before then? I mean when does the recess start? When does it end?

Tim Yager

Yes. Sure, Derek. I'll do the best I can. At the end of the day, they have a spring session. My understanding is that we will probably because of the timing of the appeal and the briefing and everything that has to take people we will most likely not make the spring session. Therefore, we will have to wait till the fall session, because they do take a summer recess or break in the action.

And so, my understanding is that sometime in the fall, hopefully early fall that they will take the matter up. And again, we'll be filing our motion with the court soon, stating that there's certainly no reason for the Supreme Court to take this case on appeal. We're obviously hopeful, that they agree with us. And we certainly believe that the lower court and the Appellate Court both got it right.

Derek Derina - SB Funds

Sure. So is it possible that it's still within the spring period. I mean are you estimating that it won't, or are you sure it won't or?

Tim Yager

Anything is possible, Derek. I don't think anyone can say definitively that it won't happen in the spring. As I said, it's my expectation it'll be in the fall.

Derek Derina - SB Funds

Okay. And then what timing if you decided to press for an injunction? Is there any reason you need to wait for something on that? I mean do you need to wait for shareholder approval by Clearwire, for it to be right for adjudication? Or can you just go ahead with that now since it's already announced they have a definitive agreement? Which is not to say what you will do, but?

Tim Yager

Yes. No, Derek, I appreciate your question and I appreciate your interest in this. But certainly, this isn't the forum for us to discuss legal strategies or timing of legal strategies and those kinds of things. So I'm not going to comment any further on what or when we may do something.

Derek Derina - SB Funds

Okay.

Tim Yager

All right.

Derek Derina - SB Funds

Thank you.

Tim Yager

Thank you, Derek.

Operator

Thank you. Your next question is coming from Rob Hopper of UBS.

Rob Hopper - UBS

Hey, guys. Just want to follow up on that last question, if I may, for a second. See if I can ask it in a slightly different way. This week a number of things have come out, one on the Sprint side, in terms of their exploring different options, potentially one including a spinout of Nextel, then this morning, we have the WiMax situation.

If they do say, go and spin off Nextel that changes some of the potential legal arguments, here. Given that they've structured the WiMax joint venture so that it's going to be a Clearwire business that they will be a majority owner of, it seems. But it's going to be marketed and labeled as Clearwire.

I guess what I'm trying to understand is, from your perspective, if they do spin off Nextel and if they do go forward as they're going forward with the Clearwire situation. Is this something that they potentially can get away from any exclusivity in your eyes?

Tim Yager

Again, Rob I'm not going to comment on what I think legally Sprint can and can't do. That's not in the best interest of the Company. I will just reiterate that, we take our exclusivity rights incredibly seriously. We will fight vigorously to defend them.

Rob Hopper - UBS

Okay. A couple of data points, one, cash flow from ops, did you guys give that out yet?

Steb Chandor

No. Not at this point, we'll be filing our Q again later this afternoon or tomorrow.

Rob Hopper - UBS

Okay. On the bad debt it spiked up just a little bit from the fourth quarter. I know you've put a lot of processes in place to improve churn and bad debt. But you even comment that it's going to take a little while to work that through. Should we expect bad debt to continue to trend up in the next couple of quarters, until some of those things start flowing through? Or is this something that we should expect to see sort of flattish to eventually down?

Tim Yager

Yes. We obviously won't comment on the quarter-to-quarter activity, other than to say that we do believe the bad debt expense in the second half of the year will be down fairly substantially from in the first half of the year.

Rob Hopper - UBS

From first half, okay, that's helpful. And then lastly, you guys have been pretty consistent with providing your 2009 EBITDA growth guidance. Can you help us frame out sort of what some of the just broader assumptions are behind that? Is it mostly driven by reduced churn and bad debt, or is it mostly driven by accelerated gross adds or some moderation of gross adds. A little bit more behind some of this the expectation there

Tim Yager

Sure. I think first and foremost, it's getting the additional leverage in our business. Just by growing our subscriber base and leveraging a fixed network design. I think that's certainly part of it. I think that as we get more data card sales and those kinds of products with a higher ARPU that certainly provides positive trends.

I think also getting our roaming rates set at $0.04 for '09 makes it a lot easier for us to predict where that's going. And the trends there have been incredibly strong for the company over the last quarter, too. So I think when you put those things together, those are all the components we put together to help us formulate our opinion.

Operator

(Operator Instructions). You have a follow-up question coming from Jon Schildkraut of Jefferies.

Tim Yager

Hey, Jonathan.

Jon Schildkraut - Jefferies

Hi. Thanks. Yes. I just wanted to circle back on something Steb said during his prepared comments about voluntary churn and involuntary churn. Obviously, this quarter was a really good quarter for you guys on the churn side. No doubt, due to the efforts that you'd been putting in over the last several months.

At 2.3%, it matches the low that we've seen in long time. And even on a blended rate, it's probably the lowest rate that we've seen in a couple years. As we enter into the next quarter, is there any reason that we shouldn't believe that the trends that we saw this quarter will continue?

Are you as a company expecting or seeing something in your own kind of analyses that would lead us to believe that the voluntary churn won't remain at the levels that it has been? Thank you.

Tim Yager

Sure, Jonathan. I think, we've certainly we're approaching the second quarter, which has historically been our low point for churn for the Company. We feel that the procedures we've put in place on the credit policy are going to help us long term. We think that the network expansion that we did in 2007 is helping.

And we certainly feel that the big expansion we're doing in a couple key areas in 2008 are going to have a positive impact. So we obviously feel pretty bullish on churn characteristics, going forward from here.

Jon Schildkraut - Jefferies

All right, great. Congratulations again, on a good quarter.

Tim Yager

Thanks, Jonathan. Appreciate it.

Operator

(Operator Instructions). There appear to be no more questions at this time. I will turn the floor back to Tim for any closing remarks.

Tim Yager

Thanks, Sheryl. I just want to thank everyone for taking the time to join us this morning. And we look forward to updating you on our future calls. Thank you.

Operator

Thank you. This concludes today's iPCS first quarter 2008 conference call. You may now disconnect.

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