Sprint Nextel’s (S) Dr. Jekyll and Mr. Hyde operations continued in the third quarter as the carrier continued to show improved customer growth results that are hampered by higher costs associated with network upgrade plans and the recent launch of Apple’s iPhone.
For the quarter, Sprint Nextel said it added 1.3 million net customers, pushing its total customer base to nearly 53.4 million subscribers. Bolstering that quarterly growth was a strong 839,000 net customer additions through its prepaid CDMA operations that run through the carrier’s Boost Mobile and Virgin Mobile USA operations. Sprint Nextel also managed to add 265,000 postpaid customers to its CDMA network during the quarter.
However, those gains were offset by the loss of 354,000 prepaid customers and 309,000 postpaid customers from its iDEN operations. Net-net, Sprint Nextel’s direct customer growth amounted to a still positive 441,000 net customer additions.
The remainder of the carrier’s customer growth came from affiliate and wholesale partners that contributed 835,000 customers to Sprint Nextel’s network during the quarter. That overall growth was ahead of the nearly 1.1 million customers the carrier added during the second quarter of the year and nearly double the 644,000 customers added during the third quarter of 2010.
Helping to bolster that year-over-year growth was improved customer churn results, which dropped from 1.93% to 1.91% on the postpaid side and from 5.32% to 4.07% on the prepaid side. Postpaid average revenue per user surged $3 per month to $58 year-over-year, while prepaid ARPU dipped $1 to $27.
That customer and ARPU growth helped boost Sprint Nextel’s wireless revenues from $7.175 billion during the third quarter of 2010 to $7.5 billion this year. Net expenses also were held in check, falling from $7.5 billion last year to just under $7.4 billion this year, resulting in a turnaround in wireless operating income from a loss of $345 million last year to a gain of $131 million this year.
Including its wireline operations, Sprint Nextel managed to increase revenues year-over-year from $8.152 billion in 2010 to $8.333 billion this year. Operating expenses also improved from $8.365 billion in 2010 to $8.125 billion this year, helping to push net losses down from $911 million during the third quarter of 2010 to $301 million this year.
As part of its expedited Network Vision plan that now includes plans for nationwide LTE coverage by the end of 2013, Sprint Nextel reported that wireless capital expenditures increased year-over-year from $341 million to $647 million and sequentially from $546 million it spent during the second quarter of this year.
Going forward, Sprint Nextel’s management conceded that the carrier will continue to face headwinds in the near term as it looks to fund its Network Vision program as well as upfront costs associated with its recent launch of Apple’s iPhone. The carrier noted that the iPhone deal was currently set at four years, with much of the costs front loaded. That upfront cost is expected to impact the carrier’s Q4 earnings before interest, taxes, depreciation and amortization, which Sprint Nextel said would be in the $600 million to $800 million range. Analysts were expecting Q4 EBITDA to be in excess of $800 million.
Longer term, Sprint Nextel said it expects 2013 to be the peak of its capital needs related to both Network Vision and continued iPhone sales, but that by 2015 the benefits from both projects should begin to outweigh the associated costs. The carrier also said it will likely need between $5 billion and $7 billion in funding to support operations. To shore up some of that, Sprint Nextel said it had amended the terms of its revolving credit facility and increased the amount by $150 million to $2.24 billion. Sprint Nextel noted that the amendment modifies the definition of EBITDA by allowing the carrier to “add back in its calculation of EBITDA certain equipment net subsidy costs.”
Sprint Nextel said it ended the third quarter with approximately $5 billion total liquidity and that its next scheduled debt maturities of $2.3 billion were due in March of next year.
Sprint Nextel’s stock was trading down nearly 10% early Wednesday at around $2.40 per share.
Bored? Why not follow me on Twitter.
