Sprint Nextel Corp. stock rose nearly 5% on its first-quarter results, during which the nation’s third-largest wireless carrier said it finally slowed its subscriber losses and reported the first increase in net operating revenues and service revenues for the first time in three years.
“Driven by the best year-over-year improvement in post-paid gross subscriber additions and the highest prepaid gross subscriber additions in five years, the company achieved the best total company net subscriber results since the third quarter of 2007,” Sprint Nextel said in announcing its results. The carrier lost 75,000 customers in the quarter. Sprint Nextel now counts 48.1 million customers on its network, comprised of 33.4 million postpaid subscribers, 11 million prepaid subscribers and 3.6 million wholesale and affiliate customers. The carrier lost 578,000 post-paid customers, but gained 348,000 prepaid customers and gained another 155,000 wholesale and affiliate subscribers. Last week, AT&T Wireless and Verizon Wireless reported Q1 results. Both carriers saw drops in the number of postpaid wireless net adds.
Net operating revenues totaled $8 million, down 2% from the year-ago period for a net loss of $865 million. The net loss is significantly worse than the $594 million reported in Q1 2009, in part due to a $365 million noncash expense related to deferred tax charges. The company spent $419 million on capital expenses in the quarter and is on track to spend up to $2 billion for the year.
Postpaid churn stood at 2.15%, better than the 2.25% from the year-ago quarter. Further, churn in the first quarter of 2010 would have been 2.12%, but the carrier began deactivating former Helio customers. Prepaid churn also improved from Q1 2009 to Q1 2010, from 6.86% to 5.74%. Sprint attributes the improved churn metrics to including Virgin Mobile customers, who typically churn less than Boost Mobile customers.
Postpaid average revenue per user was $55, down $1 from $56 in the year-ago period. Prepaid ARPU stood at $27 for the quarter, down $4 from the $31 in ARPU a year ago. Part of the reason for the decline in ARPU is the addition of Virgin Mobile and Assurance Wireless branded customers, who have lower ARPU than Boost Mobile customers. The carrier said going forward it will not disclose ARPU data because it is part of its fixed-rate bundle plans.
Sprint Nextel CEO Dan Hesse said the carrier expects its prepaid business to continue to grow throughout the year and in the next few weeks will implement its prepaid brand strategy as well as repositioning its existing brands, and adding another brand, which should impact results in the second half of the year. “We’re glad we’ve expanded our prepaid business.”
The carrier plans to re-vamp its Virgin Mobile brand and will introduce another brand to address the pay-as-you-go segment in the next two to four weeks, said Dan Schulman, who oversees Sprint’s prepaid business. Schulman said that while price is always a part of all carriers’ value proposition, Sprint is able to take a more sophisticated marketing approach rather than just look at the “blunt instrument” of pricing.
While Hesse said that its prepaid business may cannibalize some of its own postpaid subscribers, it was better to lose postpaid customers to its own prepaid brands rather than its competitor’s prepaid offerings.
In response to a question on speculation that Clearwire may add more carriers on its network in the future, Hesse said Sprint gets a founder’s discount from Clearwire that other carriers will not get.
The carrier also said that as it continues to lose iDEN customers, it may be able to take advantage of new technology developments to refarm some of that iDEN spectrum for other uses. The carrier lost 447,000 iDEN customers in the quarter.
Sprint Nextel's stock up on Q1 financial results, plans to add brand in a few weeks
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