Sprint Nextel Corp. (S:US), the third- largest U.S. wireless carrier, jumped the most in almost three years after iPhone demand helped bolster spending on data plans, lifting the company’s sales above analysts’ estimates.
Sprint shares (S:US) rose 20 percent to $4.05 in New York, the biggest one-day gain since November 2009. The stock has now climbed 73 percent this year.
Sales rose 6.4 percent to $8.84 billion, Overland Park, Kansas-based Sprint said today in a statement. Analysts had estimated $8.73 billion on average, according to data compiled by Bloomberg. Its net loss widened to 46 cents a share, bigger than the 41 cents predicted, because the company is funneling money into an infrastructure-upgrade plan called Network Vision.
“I’d say we are in the middle of the turnaround,” Chief Executive Officer Dan Hesse said in a phone interview. “We need to execute on our Network Vision, which is critical, but right now we feel very good about our competitive position.”
Sprint’s contract customers spent $63.38 on average a month last quarter, up $4.31 from a year earlier, which the company said was the biggest year-over-year increase in the history of the U.S. wireless industry. Analysts projected $60.02, according to a Bloomberg survey. Sprint has added the iPhone to its lineup, prodding subscribers to spend more on data plans so they can surf the Web, watch videos and use the Siri voice assistant.
“It was a solid quarter,” said Kevin Smithen, an analyst at Macquarie Securities USA Inc. in New York. The results show that Sprint was smart to get the iPhone, he said, despite a costly purchase agreement it made with Apple Inc. (AAPL:US) “People will question why they got the iPhone. Now they have the answer.”
Sprint also increased its operating-income forecast for 2012 to $4.5 billion to $4.6 billion, excluding some items, up from about $3.9 billion.
“We are doing a good job on managing customer phone upgrades and we are getting a better financial performance from our Network Vision investment,” Hesse said in the interview. “All of those things give us the confidence to significantly raise our forecast for the year.”
Even so, Sprint continues to struggle with a customer exodus. Its contract subscriber base has shrunk for five years, contributing to 19 straight quarterly losses. Sprint lost 246,000 contract customers in the second quarter -- spurred by the company phasing out its once-popular Nextel network.
Sprint’s customer losses widened from the 101,000 it shed a year earlier. The latest number also exceeded the loss of 238,250 estimated in a Bloomberg survey of eight analysts. The shrinking customer number puts Sprint further behind Verizon Wireless, which added 888,000 contract customers in the second quarter, and AT&T (T:US) Inc., which netted 320,000.
Many of Sprint’s ex-customers were using the Nextel network, which relies on outdated technology. The company has said it will shut down the Nextel network as early as June 30, 2013. Excluding former Nextel users, Sprint’s customer loyalty improved, Smithen said.
“Going into this week, I think you saw people getting a little nervous, but with this report, I think you’ll see some bounce in the stock,” Smithen said.
Clearwire Corp. (CLWR:US), whose biggest customer is Sprint, also saw shares jump today. The stock rose as much as 11 percent to $1. Sprint relies on Clearwire’s wireless broadband network to serve its subscribers.
Sprint is overhauling its network to use a faster technology called LTE, or long-term evolution. The standard will help the company catch up with AT&T and Verizon, and accommodate the next iPhone, expected later this year.
Sprint started LTE service this month in five major cities: Atlanta, Dallas, Houston, San Antonio and Kansas City. The company will add four more cities -- Baltimore; Gainesville, Georgia; Manhattan/Junction City, Kansas; and Sherman-Denison, Texas -- by early September. AT&T is in 47 cities with LTE, while Verizon Wireless, which had a one-year head start on the upgrades, has the service in 337.
To keep customers from leaving for AT&T and Verizon, Sprint signed a four-year, $15.5 billion contract with Apple to sell the iPhone. While the device has helped Sprint entice users, it also added another expense to the money-losing business. The crunch has forced Sprint to seek new sources of funds.
In May, the company signed a $1 billion vendor financing deal with Ericsson AB, allowing it to purchase equipment through a credit line. In November, the company sold $4 billion of bonds, with $2 billion more following in February.
To contact the reporter on this story: Scott Moritz in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Nick Turner at email@example.com