Sprint Nextel Had Subscriber, Financial Net Losses in Q4
Sprint Nextel lost a net 337,000 subscribers across its networks during Q4, with growth on its CDMA and LTE networks only partially outweighing a heavy subscriber exodus from the soon-to-be-shuttered iDEN network used by its Nextel service subscribers. The carrier’s Sprint networks added 401,000 postpaid and 525,000 prepaid subscribers, while its Nextel network lost a net 1.02 million subscribers. Sprint said it also lost a net 243,000 wholesale subscribers. Sprint added a net 605,000 subscribers for the entire year, down from a net 5.1 million added in 2011. Exits by Nextel subscribers will continue to accelerate as the service nears its targeted shutdown in the middle of the year, Sprint CEO Dan Hesse said Thursday during a conference call with investors. Sprint said it expects it will see a diminishing percentage of exiting Nextel subscribers choose to join the remaining networks; about 51 percent of Nextel subscribers who terminated their service during Q4 chose to join other Sprint services (http://xrl.us/boff9q).
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Delays in the Network Vision plan had also contributed to the subscriber loss, Hesse said. Subscriber churn caused by Network Vision will be temporary, but “is likely to remain at elevated levels for the next few quarters before we start to see gradual benefits” from the upgrades, Sprint Chief Financial Officer Joseph Euteneuer told investors. Sprint spent $1.3 billion on the Network Vision plan during the quarter, he said. Sprint is “working hard to make up for the delays encountered in 2012,” some of which were caused by Superstorm Sandy, said Steve Elfman, the carrier’s head of network operations. Sprint still expects it will have completed its upgrade of 12,000 sites by the end of Q1. The carrier is smart “to spend this now in an effort to make it competitive with its larger peers,” said Wells Fargo analyst Jennifer Fritzsche in an email to investors.
The impending Nextel shutdown also contributed to Sprint’s $1.32 billion net loss in Q4. The carrier attributed $400 million of its net loss to costs associated with the impending shutdown, and $45 million to Sandy’s impact. Verizon Wireless said its $1.93 billion net loss in Q4 stemmed partially from charges related to Sandy, while AT&T said Sandy was also partially to blame for its $3.9 billion net quarterly loss. Sprint said it earned $9 billion in revenue during the quarter, up from $8.72 billion a year ago. Sprint’s Q4 net loss was slightly above the $1.3 billion loss it reported for the same period in 2011 and well above its $767 million net loss in Q3 (CD Oct 26/12 p9).
Hesse and other Sprint executives barely mentioned SoftBank’s proposed purchase of 70 percent of the carrier, or Sprint’s proposed buyout of Clearwire, because of “securities law issues.” But the SoftBank deal would “serve as a catalyst for accelerating our turnaround efforts,” while the Clearwire purchase “would give Sprint complementary spectrum to our low and medium frequency spectrum assets,” Hesse said. Its purchase of spectrum and customers from U.S. Cellular in the Chicago and St. Louis markets, announced in November, “should strengthen our network performance in those markets,” he said.
Sprint had $9 billion revenue during Q4, up from $8.7 billion at the same time in 2011. Sprint’s revenue for the full year was $35.4 billion. The growth in revenue was in part because the carrier sold 6.1 million smartphones during the quarter, including 2.2 million iPhones. Smartphones represented 77 percent of Sprint’s retail handset sales and 89 percent of its postpaid handset sales.
Sprint’s results were better than research analysts’ consensus forecast, said New Street Research analyst Jonathan Chaplin in an email to investors. The carrier’s ability to beat consensus expectations was “particularly impressive given higher Network Vision activity and significantly higher-than-expected gross adds,” he said.