Cingular Wireless said yesterday that continuing expenses of integrating two companies hurt profit in the second quarter, but it assured...

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Cingular Wireless said yesterday that continuing expenses of integrating two companies hurt profit in the second quarter, but it assured shareholders that the benefits of acquiring AT&T Wireless were just beginning to pay off.

“The merger is working, and it’s everything we hoped it will be,” said Chief Financial Officer Pete Ritcher during the Atlanta-based company’s conference call with analysts yesterday. “We’ve made great progress, but we have only scratched the surface.”

For the quarter ended June 30, Cingular reported profit of $147 million, compared with $339 million a year ago. The figures from 2004 include results from Redmond-based AT&T Wireless, even though the merger was not complete until October.

Revenue increased only marginally, reaching $8.6 billion in the second quarter vs. $8.2 billion in the year-ago period.

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Higher operating expenses were mostly behind the profit drop. In the second quarter, those expenses totaled $8.1 billion, including $204 million in integration costs. In 2004, operating expenses were $7.9 billion.

Still, the company was able to add 1.1 million subscribers for a total 51.6 million, helping it maintain its lead over Verizon Wireless as the largest U.S. wireless carrier.

Customer turnover, or churn, also followed a more positive trend, decreasing to a record low of 1.8 percent from 1.9 percent in the first quarter and 2.1 percent in the fourth quarter of 2004.

If prepaid customers are included in churn, the figure rose to 2.2 percent. Prepaid customers tend to leave more easily because they don’t have a contract.

Analysts yesterday questioned the decrease in the average revenue per user (ARPU), which fell 5.6 percent to $50.43 compared with a year ago.

The company said it was taking steps to reverse that, including reintroducing the GoPhone, a prepaid service; selling data such as ringtones; and encouraging text messaging.

It also focused on reducing the number of national plans it sells and increased the cost of family plans on some phones from $9.99 to $14.99 a month.

Cingular also outlined benefits yet to be seen from the merger, including the integration of older networks and elimination of overlapping cell sites.

“All of those cost savings are yet to come out of the business. They are real and big,” Ritcher said.

Cingular is a joint venture between BellSouth and SBC Communications.

Yesterday, BellSouth traded down 4 cents to close at $26.72, and SBC rose 1 cent to $23.80.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com