Sprint PCS gave analysts some guidance on how much wireless data contributed to its overall second-quarter financial results, which improved significantly from the first three months of the year.
Customers on data plans generate higher minutes of use than Sprint PCS’ average customer, which helped drive average minutes of use to 400 minutes per month, Ronald LeMay, the carrier’s new president, told analysts during the company’s quarterly conference call. Sprint PCS launched its Wireless Web offering nationwide nearly one year ago.
“The results are very encouraging,” said LeMay. “Data is beginning to make a contribution to revenues and overall minutes of use. In the quarter, we reached a significant milestone, passing the one-half million mark on data users, consisting of over 200,000 monthly subscribers and over 300,000 monthly casual users.”
Overall, wireless data’s contribution to average revenue per unit doubled from the first quarter, but it is contributing less than $1 to the $58 ARPU recorded in the second quarter, LeMay said. He added that Sprint PCS will expand its text messaging capabilities later this year and add more data applications, which should drive additional usage.
Sprint PCS, which added 883,000 customers in the second quarter, reached cash-flow positive during the quarter, a quarter earlier than what the company and analysts expected. Sprint PCS expected to record a cash-flow loss of around $100 million, but ended the second quarter with $11 million in operating cash flow.
“Many forecasted a crossover in the third quarter this year,” said Arthur Krause, executive vice president and chief financial officer of Sprint Corp. “This significant year-over-year improvement is attributed to stronger ARPU and the leverage of operating costs we have gained from an increase in subscriber base.”
Year-over-year ARPU increased 7 percent, cost per acquisition declined 21 percent and operating cash cost per user declined 26 percent, he said.
Sprint PCS ended the second quarter with about 7.4 million customers. Krause said the company expects to add around 900,000 customers in the third quarter.
“We have revised our annual growth target to about 4 million net additions,” said Krause. “We are seeing high take rates on our Free and Clear plans with one-year contracts.”
Sprint PCS is using one-year contracts to help reduce its historically high churn rate. Though customers have the choice not to sign a contract, they receive more incentives if they are willing to make long-term commitments. The carrier reduced its churn rate to 2.6 percent in the second quarter from 3 percent the previous quarter.
Losses for the quarter reached 46 cents per share, compared with 54 cents in the first quarter. Total service revenue for the quarter was more than $1.2 billion, a 23-percent increase from the previous quarter.
Average revenue per unit reached $58, up from $54 the company had reported in the first quarter. Higher ARPU was driven by a new $30 activation it charges customers and by increased minutes of use, the company said.
