Sprint Nextel expects churn to improve by second-half ’07

Sprint Nextel Corp. expects to see substantial improvement in its churn performance in the second half of next year, and the focus on its core operations means that its previous fascination with rolling up its affiliates is now far from the top of the company’s priority list.
Paul Saleh, Sprint Nextel’s chief financial officer, told analysts last week at a financial conference hosted by Credit Suisse First Boston that the carrier is focused on improving its performance and getting more prime customers into its mix.
However, he hinted that the fourth quarter may again be a tough quarter for the company. Saleh said that Sprint Nextel tightened its credit requirements in the third quarter and again in the beginning of the fourth quarter. The third quarter produced dismal results for the company, particularly in terms of postpaid customers; Sprint Nextel reported a loss of 188,000 postpaid customers, but its prepaid Boost Mobile L.L.C. brand and wholesale partners bolstered the company at an overall gain of 233,000 customers.
However, the third-largest U.S. carrier expects to see improvements to churn by the second half of next year, Saleh said, and perhaps as soon as the second quarter.
“It will take a little while to just really see some of the improvements that we’re making play out through the churn,” Saleh said. “It does take a little while for . perception to catch up with the reality of network improvement,” he added.
Saleh confirmed that Sprint Nextel has pulled back on the aggressive growth of its Boost subsidiary, and said the carrier had “actually excluded the service from certain markets through product availability and the like, so that we do not tax our iDEN network.”
He added that once Sprint Nextel is finished with its ongoing 800 MHz rebanding effort and its iDEN network is returned to its full capacity, that the markets would be open again to Boost. That is expected to happen by early next year. Boost has been a significant driver of positive customers for Sprint Nextel in recent quarters; the brand added 216,000 customers in the third quarter.
Asked why Sprint Nextel has not yet acquired affiliate iPCS Inc., Saleh responded: “At this time, I think it is much more a question of what is the best use of our capital and what’s the return that we can achieve on the capital.
“We feel that we have enough on our plate,” he went on. “We have to focus on the core business . and I wouldn’t say that [acquiring iPCS] is a top priority for us.”
iPCS and Sprint Nextel are still involved in a lawsuit over violations of affiliate agreements, sparked by Sprint Corp.’s acquisition last year of Nextel Communications Inc. Sprint Nextel has already spent billions of dollars acquiring a handful of disgruntled affiliates, including US Unwired Inc., Alamosa Holdings Inc. and Nextel Partners Inc.
Saleh also said that although wireless connectivity for consumer electronics will be a prime use for the carrier’s planned WiMAX network, “voice on that network is going to be part of the equation” eventually, and that the carrier is thinking about working with its cable company partners in offering that type of service.