Sprint lost more postpaid customers in the first quarter than analysts expected as it faced additional competition from Verizon's iPhone 4, which launched in February.
Company CEO Dan Hesse said during a conference call with analysts that the iPhone continues to be a "significant competitive threat," especially with the iPhone 4 now at Verizon and the price of the iPhone 3GS dropping to $50 at AT&T.
"Needless to say, Verizon's introduction of the iPhone in Q1 did have a notable impact on our net add performance during the quarter," Hesse said.
Sprint lost 114,000 postpaid customers as declines in its iDEN and Nextel PowerSource customers offset gains with the company's CDMA customers. Analysts polled by Reuters expected Sprint to lose 40,000 contract customers in the first quarter.
However, gains in Sprint's prepaid and wholesale segments more than made up for the slump in the company's postpaid base. Sprint managed to add more than 1.1 million net customers during the first three months of 2011, its best net subscriber gains in five years.
The company posted 389,000 net wholesale customers and a best-ever increase in its prepaid base, which added 846,000 net customers. Sprint's customer base now stands at about 51 million subscribers.
AT&T and Verizon Wireless' subscriber gains outpaced Sprint's in the first quarter as both operators benefitted from the iPhone. Verizon added 906,000 net postpaid customers last quarter and AT&T added 165,000 net postpaid customers, excluding the impact from the integration of Alltel and Centennial customers.
Churn improved in both Sprint's postpaid and prepaid segments. Postpaid churn dropped to the best-ever rate of 1.81 percent, and prepaid churn fell to 4.36 percent, Sprint's lowest prepaid churn rate in more than five years.
Postpaid ARPU rose one dollar over last year to $56, as did prepaid ARPU, which reached $28.
Sprint attributed the rise in revenue from its postpaid base to its $10 data charge for new postpaid smartphone customers, which went into effect on Jan. 30. An increase in fixed-rate bundle plans also helped raise postpaid ARPU. About 9 percent of Sprint's postpaid customers upgraded their handsets during the first quarter.
Overall, Sprint cut its losses nearly in half. The company posted a net loss of $439 million in the first quarter, compared to a loss of $865 million during the same period last year. Sales rose slightly to $8.3 billion, from $8.08 billion in 2010.
Sprint's stock rose slightly in early morning trading on the New York Stock Exchange, bumping up about 2.5 percent to $4.91 by 9:25 a.m. Eastern.