Losses mount for Sprint as it reduces churn

Losses continue to mount at Sprint Nextel Corp. (S) even as it makes well-received strides in customer care and reduces churn.
The nation’s third-largest carrier reported a net loss of $760 million in the recently closed second quarter, which is nearly double the $384 million it lost in the same period last year. The Q2 losses were inflated, however, by a non-cash $302 million charge for a tax adjustment.
Sprint ended the quarter with $8 billion in revenue, down by about 1% from the previous year. Overall, annual losses have jumped 66% from the year-ago period ending June 30. A year ago, the company reported a 12-month loss of $978 million. The most recently closed 12-month period ended with a loss of $1.625 billion. The carrier ended the quarter with $4.3 billion in cash and cash equivalents.
Subscriber breakdown
Sprint closed the quarter with 48.2 million customers, including 33.2 million postpaid subscribers and 11.2 prepaid subscribers. The postpaid group is comprised of 26.2 million on Sprint’s CDMA network, 6.4 million on its iDEN network and 517,000 subscribers who use both networks. Meanwhile, the prepaid group is made up of 5.2 million iDEN subscribers, 6 million CDMA subscribers and about 3.8 million wholesale and affiliate subscribers on the CDMA network.
Nonetheless, the carrier reported a total net addition of 111,000 customers. Retail subscribers declined by a net of approximately 55,000 while whole and affiliate subscribers jumped by 166,000, according to the carrier. The postpaid business lost 228,000 subscribers, which marks a solid improvement from the 991,000 postpaid customers that churned a year ago.
Still, the iDEN network continues to be the problem child for Sprint, as the bulk of customer losses are fleeing from that dated network. On the postpaid side, Sprint’s CDMA network added 136,000 customers while the iDEN network lost almost 364,000 customers. Sprint’s prepaid business added a net gain of 173,000 subscribers, including 638,000 net additions on the CDMA network and a net loss of 465,000 iDEN customers.
All in all, Sprint said the quarter ended with the “best ever postpaid churn” of 1.85%, compared to 2.05% a year ago and 2.15% in the previous quarter. Prepaid churn came in at 5.61%, which is also down from 6.38% a year ago and 5.74% in the first quarter of 2010. Sprint said the decline in churn on the prepaid side was largely due to the recent inclusion of Virgin Mobile customers who tend to churn at a much lower rate than Boost Mobile customers.
Finally, Sprint reported that about 9% of its postpaid customers upgraded their devices during the quarter.
“Our intense focus for the past ten quarters on improving the customer experience, strengthening our brands, and generating cash are paying off,” CEO Dan Hesse said in a prepared statement. “With strong cash flow, stable OIBDA and widespread third-party recognition for the improvements we’re making in the customer experience, which in turn strengthens our brands, we feel we can confidently improve our subscriber forecasts for the second half of 2010 and deliver positive total net wireless subscriber additions for the remainder of the year.”