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Sprint Losses Widen, Net Adds Slump in 3Q

Thu, 10/25/2012 - 6:50am
Maisie Ramsay

Sprint's turnaround effort stumbled during the third quarter on ballooning losses and a net loss of customers stemming from the shutdown of its Nextel platform.

"Sprint's third quarter results illustrate just how difficult it is to grow in a market that really isn't growing anymore," Bernstein Research analyst Craig Moffett said in a research note. “As with AT&T yesterday, Sprint's subscriber results missed badly.”

Though Sprint managed to grow its postpaid base with the net addition of 410,000 customers, ongoing declines in its Nextel business threw its subscriber numbers into the red, resulting in an overall net loss of 423,000 customers.

The customer numbers were a reversal of Sprint’s gains during the same period last year, when it added 1.27 million net new customers.

Sprint said it managed to recapture nearly 60 percent of its outgoing Nextel postpaid customers. Even so, it lost 1.3 million Nextel subscribers.

The iPhone had a marginal effect on the customer numbers. Sprint sold 1.5 million iPhones last quarter, with new customers accounting for 40 percent of those sales. It also reported sales of 1 million LTE smartphones before the iPhone 5 launched shortly before the end of the quarter.

Sprint's iPhone sales were far fewer than competitors AT&T and Verizon Wireless. AT&T activated 4.7 million iPhones and Verizon sold 3.1 million iPhones during the same period, more than double the number sold by Sprint.

The operator's losses more than doubled to $767 million from a loss of $301 million last year, with higher smartphone subsidy costs and a $397 million charge on the declining value of its Nextel assets contributing to the loss. Sales inched up 5 percent to $8.76 billion.

However, the losses were less than some analysts had expected.

Churn and ARPU were bright spots in Sprint's mixed financial results. Both postpaid and prepaid churn on the Sprint platform declined, coming in at 1.88 percent and 2.93 percent, respectively. A marked increase in churn on the Nextel platform offset the improvements, resulting in an increase in total postpaid churn to 2.09 percent.

Postpaid ARPU on the Sprint platform rose $3 to $63.21, with prepaid ARPU inching up to $26.19. Nextel ARPU fell for both prepaid and postpaid customers.

During its earnings call, Sprint CEO Dan Hesse declined to go into specifics of how the company's pending buyout by Softbank would affect its strategy.

Moffett predicts that Sprint's strategy "will almost certainly change once Softbank takes control. Softbank has promised a better network and has hinted at lower prices."

The Japanese operator is paying $20.1 billion for a 70 percent stake in Sprint, and has already poured $3.1 billion into the company in the form of convertible bonds.

 

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