Sprint Loss Narrows After Contract-Customer Defections Slow
April 28, 2011, 4:07 PM EDTBy Greg Bensinger
(Updates with CEO’s comment in eighth paragraph.)
April 28 (Bloomberg) -- Sprint Nextel Corp., the third- largest U.S. mobile-phone carrier, reported a narrower loss than analysts estimated after contract-subscriber defections slowed and prepaid-customer rolls increased. The stock jumped.
The first-quarter loss narrowed to $439 million, or 15 cents a share, from $865 million, or 29 cents, a year earlier, the Overland Park, Kansas-based carrier said in a statement today. Analysts predicted a loss of 22 cents, the average of estimates compiled by Bloomberg.
Sprint added 846,000 prepaid users, while losses of the more lucrative customers who sign up for two-year contracts shrank to 114,000 from 578,000 a year earlier. The carrier added handsets such as the HTC Corp. Evo to wrest customers from larger rivals AT&T Inc. and Verizon Wireless and draw users to its fourth-generation network.
“Sprint had a significant improvement in postpaid customer churn and their prepaid results were well ahead of expectations,” Michael Nelson, a Mizuho Securities analyst in New York, said in an interview. He estimated Sprint would add 450,000 prepaid customers and lose 75,000 postpaid users.
The rate at which contract customers left, known as churn, fell to 1.81 percent from 2.15 percent a year earlier. Contract customers spend more each month than prepaid users. Churn among prepaid customers dropped to 4.36 percent from 5.74 percent.
Sprint rose 32 cents, or 6.7 percent, to $5.11 at 4 p.m. in New York Stock Exchange composite trading, the biggest gain since July 26. It has added 21 percent this year.
IPhone Competition
The carrier has been drawing more prepaid customers because Americans are seeking to spend less on their monthly bills, Chief Executive Officer Dan Hesse said in an interview.
“Smartphones are driving postpaid and the desire not to have a contract is driving prepaid,” he said.
Verizon, which started sales of the Apple Inc. iPhone in the quarter, and AT&T are building out competing 4G networks and boosting their subscriber rolls. AT&T added 62,000 postpaid customers last quarter and Verizon won 906,000.
“Verizon’s introduction of their new iPhone in this past quarter did have a notable impact on our net add performance,” Hesse said on a conference call, without providing details. AT&T halving the price of the older iPhone 3GS model also added to competitive pressures during the quarter, he said.
Opposing AT&T Deal
Sprint’s sales rose 2.8 percent to $8.31 billion. Analysts estimated $8.19 billion on average. The carrier cut operating expenses by 2.6 percent to $8.05 billion.
A year earlier, Sprint added 348,000 customers for its prepaid services, which include the Boost Mobile and Virgin Mobile USA brands.
Sprint has been fighting AT&T’s proposed $39 billion purchase of Deutsche Telekom AG’s T-Mobile USA unit, which would combine the second- and fourth-largest U.S. wireless operators. Hesse said today the buyout could stifle innovation and force competitors to raise prices.
Sprint likely will testify before Congress as lawmakers evaluate the T-Mobile takeover and the carrier plans to submit formal objections to the Federal Communications Commission and Department of Justice, Hesse said in the interview.
--Editors: Ville Heiskanen, Peter Elstrom
To contact the reporter on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net
To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net
