Sprint's Losses And Gains
April 26, 2012

Sprint’s Losses And Gains

Michael Harper for RedOrbit.com

Sprint has found themselves walking a very thin line lately. On one side, their Nextel carrier continues to lose subscribers in droves as they plan to shutter the service next year. Conversely, Sprint´s big bet on the iPhone has thus far proven to be a wise one, as sales of the Apple-branded smartphone helped to drive sales up 7% to 7.2 billion. That´s something both AT&T and Verizon haven´t been able to do in the most recent quarter, as most consumers await the new model to be released either this June or in the fall.

In their earnings call to analysts Wednesday morning, Sprint said 44% of the 1.5 million iPhones it sold in the first quarter were to new subscribers. All told, Sprint was able to sign 263,000 new customers to their network with contract-based plans. Verizon and AT&T, on the other hand, were only able to sign up 240,000 and 7,000 of the same customers, respectively.

Sprint said this kind of growth represented the largest year-over-year increase ever in the US wireless industry.

“Sprint posted easily the most impressive (quarter) in US telecom,” said Kevin Smithen, an analyst at Macquarie Securities, according to the Associated Press (AP).

Where Sprint can´t beat the top two carriers is speed. Their CDMA network is slower than Verizon´s CDMA or AT&T´s GSM. To counter this, Sprint has been offering what they call “truly unlimited data” to their smartphone customers. While Verizon has stopped offering this kind of service and AT&T limits the speed to those customers who reach their 2 GB “unlimited” cap, Sprint has bet big once more on iPhone, saying they will continue to offer this service when the next iPhone rolls out, even if it is LTE capable.

On the earnings call, Sprint CEO Dan Hesse defended their decision to carry the iPhone, citing customer desire and low customer support costs.

“The evidence so far supports our decision to carry the phone,” Hesse said.

Despite these strong numbers, Sprint Nextel continues to lose customers under contract.

These contract customers represent steady income for the carrier, and while AT&T and Verizon were able to increase the number of contract subscribers they signed up, Sprint slipped, losing 192,000 of these coveted customers.

The majority of these customers fleeing Sprint were subscribed to their Nextel network, which will be discontinued next year. During the last quarter, 455,000 customers left Nextel for other carriers. In an unnerving “good news – bad news” situation, 228,000 of them left Nextel and went right to Sprint, attributing to their 263,000 new subscriber claim.

Most of Sprint´s financial loss could also be attributed to the dying Nextel brand. Of the $863 million lost during the previous quarter, $543 million was a written-down on the Nextel phase-out.

Before the earnings call on Wednesday, shares of Sprint were slumped. As their cash cushion wanes and their capital expenses increase, Sprint is keeping a close eye on their losses.

As they look forward, Sprint has spent nearly $104 million to expand their network to keep pace with AT&T and Verizon; it´s an expensive rollout, but one they hope will keep them afloat as the next generation of smartphones and iPhones hits the market.