Positive postpaid trends provide shot in the arm for Sprint investors, although overall financial picture remains muddled with capex drought
Sprint yet again managed to show positive customer growth across its wireless division during its latest fiscal quarter, although investors did not seem to mind flat fiscal results that weighed on the overall picture.
For its first fiscal quarter, which ended June 30, Sprint said it added 377,000 net connections to its network, which was down from the 447,000 connections added the previous quarter and the 675,000 connections added during the same period last year. The carrier ended the quarter with 59.5 million total connections on its network.
The latest quarterly growth was led – again – by its wholesale and affiliates, which generated 528,000 net connection additions, although the results were down both sequentially and year-over-year.
Lucrative postpaid growth increased sequentially from 56,000 net additions during the previous quarter to 180,000 net additions in its latest quarter, but was down significantly from the 310,000 net additions posted last year. Sprint did tout that it posted 173,000 net postpaid phone additions for the quarter, building on positive growth from the previous quarter and surpassing the 180,000 net postpaid smartphone losses reported by larger rival AT&T Mobility.
Sprint CEO Marcelo Claure also said Sprint was port positive against all of its nationwide rivals for the quarter, meaning it attracted more customers from Verizon Wireless, AT&T Mobility and T-Mobile US than it lost.
Prepaid service continues to stymie Sprint, despite a robust service portfolio across its Sprint branded Boost Mobile and Virgin Mobile brands. The carrier posted 331,000 net prepaid connection losses for the latest quarter, which was more than posted in the previous quarter, though a slight year-over-year improvement.
Claure cited the carrier’s plans to alter its current prepaid model, noting plans to launch the change Sept. 1. Sprint recently announced plans to take its Virgin Mobile brand in a new direction, including the move of the division headquarters to Kansas City, Missouri.
In terms of customer retention, the carrier posted 1.56% customer churn for the latest quarter, which was flat year-over-year, but a sequential improvement. Prepaid churn was reported at 5.55% for the quarter, which was also a sequential improvement, but an increase from the 5.08% posted last year.
Customer spending continued to trend down, with postpaid average revenue per user sinking $3.94 year-over-year to $51.54, while prepaid ARPU slipped 47 cents to $27.34.
The spending trends were further highlighted in wireless revenue results, with net operating revenue of just over $8 billion for the quarter coming in down slightly, both sequentially and year-over-year. Net operating expense trends were mixed, with the $7.7 billion reported in its latest quarter showing a slight sequential dip, although it was up slightly compared with the same quarter last year.
One aspect of spending that caught the eye of many was $376 million in total capital expense for the quarter, which came in well below recently lowered estimates, though Sprint continues to claim it will spend around $3 billion for the full year on capex. Claure reiterated that the carrier is being very careful with capex in a move to garner a better return for shareholders, adding the carrier had over the past several years been a significant investor in capex, which has allowed the carrier to begin cutting back while not impacting network performance.
The return for investors continues to elude Sprint, with its latest quarter showing a $302 million loss, or 8 cents per share, which was a sequential improvement but larger than the 20 million loss posted in the same quarter last year. However, the carrier did bolster adjusted earnings before interest, taxes, depreciation and amortization from $2.2 billion in the previous quarter to nearly $2.5 billion in its latest quarter, with adjusted EBITDA margin growing from 32.8% to 37.7% over the same timeframe.
Sprint investors appeared jubilant with the latest results, as the carrier’s stock (S) surged nearly 20% in early trading to more than $5.50 per share, including at one point hitting a new 52-week high of $5.65 per share.
A further fleshing out of Sprint’s performance will come this week as both Verizon Wireless and T-Mobile US are set to announce quarterly results.
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