Sprint widens net loss as it loses postpaid subs

Phil Goldstein, FierceWireless
30 Jul 2009

US operator Sprint Nextel has posted a wider net loss at it continues to lose postpaid subscribers in the second quarter.

However, the company had significant prepaid subscriber additions and it also generated strong cash flow and paid down its debt.

Sprint CEO Dan Hesse confirmed to FierceWireless that Sprint would launch additional webOS-based devices in the future, following the introduction of the webOS Palm Pre last month (the carrier did not disclose Pre sales figures).

For the quarter, Sprint had a net loss of $384 million, wider than the $344 million net loss it had inthe year-ago quarter. Sprint had free cash flow of $676 million in the quarter and $1.5 billion in the first half of 2009, and a cash balance of $4.6 billion.

Sprint's stock was down around 5% to around $4.30 per share after the news.

During the company's earnings conference call, Hesse reiterated that Sprint was not the same company it was 12 months ago.

He said that "brand perception catching up to this new reality is crucial" to improving the company's postpaid subscriber trends. Sprint lost 991,000 postpaid subscribers in the quarter, an improvement from the 1.25 million postpaid subscribers it lost in the first quarter.

Here's a breakdown of some of the carrier's key metrics in the quarter:

Subscribers: Sprint lost 257,000 net wireless subscribers in the quarter. Although it lost 991,000 postpaid subscribers, it gained 938,000 prepaid iDEN customers. Sprint also lost 161,000 prepaid CDMA customers, along with 43,000 wholesale and affiliate subscribers. Sprint finished the quarter with 48.8 million total wireless subscribers, down from 49.1 million at the end of the first quarter. Sprint's subscriber base included 34.4 million postpaid subscribers, 5 million prepaid and 9.3 million wholesale and affiliate subscribers.

Revenue: Sprint said wireless service revenues for the quarter were flat sequentially at $6.4 billion, and said revenue growth from its Boost prepaid product offset postpaid declines. Wireless service revenues were down 9% year-over-year as a result of fewer subscribers.

ARPU: Wireless postpaid ARPU remained stable at $56 - where it has been for the past six quarters - which Sprint attributed to bundles such as its Simply Everything plan. Prepaid ARPU was $34, up from $31 in the first quarter and $30 in the year-ago quarter, primarily due to increased contributions from prepaid subscribers on unlimited plans.

Data ARPU: Sprint said data revenues contributed greater than $15.50 to overall postpaid ARPU. CDMA data ARPU increased more than 3% from the first quarter to greater than $18.50.

Churn: Postpaid churn in the quarter was 2.05%, an improvement from 2.25% in the first quarter, but up from 1.98% in the year-ago quarter. Sprint said the sequential improvement in churn was due to seasonality, improved credit quality of its customer base and better retention performance. Sprint said the year-over-year increase was primarily due to deactivations from business lines amid the recession. Boost churn was 6.38%, an improvement from 6.86% in the first quarter and 7.36% in the year-ago quarter.

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