Prepaid, tablets and resale helped Sprint maintain its No. 3 position in the market
Thanks to strong prepaid, postpaid tablets and its resale business, Sprint managed to stave off rival T-Mobile US for at least one more quarter in keeping its No. 3 position in the domestic mobile space. However, that position came at a cost.
The carrier said it added 1.2 million net connections during its fourth fiscal quarter ended March 31, pushing its total connection base to 57.1 million at the end of the quarter. That is just ahead of the 56.8 million net connections reported by T-Mobile US at the end of the same period.
Removing recent transactions, Sprint said it added nearly 1.25 million net connections for the latest quarter compared with a loss of 383,000 connections last year. The latest growth included 211,000 direct postpaid net additions, which was a significant turnaround from the loss of 231,000 postpaid connections last year. Postpaid growth was on the back of tablet devices, which contributed 349,000 net additions, offsetting the loss of 201,000 traditional phone connections. Sprint attempted to take solace in the fact that traditional phone losses continue to improve.
Direct prepaid services added 546,000 net connections this year compared with a loss of 364,000 connections last year, while wholesale and affiliates contributed 492,000 net additions this year compared with 212,000 net additions last year. The carrier noted its Boost Mobile operations were a significant driver of that prepaid growth, but added that it expects prepaid growth to slow in the current quarter due to recertification of Assurance Wireless customers and seasonality.
Sprint management claimed the carrier was port positive versus its main rivals combined during the quarter, something it said it hadn’t accomplished in three years. Sprint CEO Marcelo Claure commented that the carrier was seeing different porting results than what has been mentioned by T-Mobile US, which was said it was seeing positive porting measurements from all of its rivals.
“We have no idea how they get to the numbers that they quote,” Claure told investors on a conference call. “I mean, they are completely, vastly different than what we’re seeing.”
During the first few months of this year, speculation has raged over the legitimacy of Sprint’s numbers, with some published reports indicating that at the end of last year up to 1.7 million of Sprint’s connections through wholesale partners had been inactive for at least six months. T-Mobile US CEO John Legere took that situation to bolster his previous forecast that T-Mobile US would be the No. 3 operator by the end of last year, a prediction he was forced to admit may have been a bit off following the numbers released by Sprint.
Helping to boost customer growth was an across-the-board reduction in churn, with postpaid churn falling from 2.11% to 1.84% year-over-year, and prepaid churn dipping from 4.33% last year to 3.84% for its latest quarter.
The competitive pricing environment, which Sprint has contributed to, showed in a steep decline in average revenue per user, which on the postpaid side fell $6.58 year-over-year to $56.94 during the quarter. On the prepaid side, Sprint managed to show a $1.05 improvement to $27.50. When factoring in device payments for postpaid plans, ARPU fell $2.42 to $61.71.
The drop in ARPU contributed to an overall dip in revenue, which plunged from nearly $8.9 billion during the fourth fiscal quarter of 2013, to less than $8.3 billion this year. Sprint said it expects revenues to continue to be pressured until the carrier can turn around phone net additions.
Net expenses dropped by a lesser extent, resulting in an increased net loss of $224 million. Pulling out just wireless services, Sprint’s net income fell from $490 million last year to $320 million this year. Earnings before interest, taxes, depreciation and amortization increased year-over-year from $1.7 billion to nearly $1.8 billion, with EBITDA margins surging one percentage point to 24.4%.
Capital expenses during the quarter came in at $2 billion, which was an increase from the approximately $1.5 billion last year. Sprint said the increase was attributed to its device leasing program, with the carrier having to purchase devices ahead of time to support the program. The carrier currently expects 2015 capex to come in at around $5 billion.
Sprint claimed its LTE network reached 280 million potential customers at the end of the quarter as it continues to expand use of its 800 MHz spectrum resources. The carrier is still looking to free up those resources in a handful of areas, including near the border with Mexico.
Sprint management also noted the carrier continues to look at densification of its network through the use of small cells, and currently has RFPs out to vendors on those plans. CFO Joe Euteneuer noted that the carrier was seeing some progress on pricing for those plans, which could result in the carrier potentially lowering capital expense needs going forward. Sprint recently secured $2.1 billion in vendor financing tied to its planned use of 2.5 GHz spectrum to bolster capacity of its LTE services.
Bored? Why not follow me on Twitter
Photo copyright: / 123RF Stock Photo
