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Sprint Loss Widens, But Fewer Subscribers Flee

Published: Thursday, 29 Oct 2009 | 10:07 AM ET

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By: Reuters

Sprint Nextel reported a wider quarterly loss and a 9 percent revenue decline, but its success in slowing the loss of the most valuable wireless subscribers took some of the sting out of the results.

Sprint - Together with Nextel

At the heart of Sprint's [S Loading... () ] struggles is the loss of postpaid monthly-bill-paying subscribers, the most attractive ones in the mobile business, which has put it further behind rivals Verizon Wireless and AT&T Inc in the wireless wars.

In the third quarter, Sprint, the No. 3 U.S. mobile service, lost 801,000 postpaid subscribers, a significant number but well below the 870,000 losses analysts had feared.

"They still have an extremely long way to turn around the business and generate positive post-paid subscriber growth," said Soleil/Nelson Alpha Research analyst Michael Nelson. "Clearly, a loss of 800,000 a quarter isn't going to cut it, but it does show some sign of improvement and says they are least heading in the right direction."

Shares of Sprint were up in choppy premarket trade. Helped by the introduction of Palm's [PALM Loading... () ] high-profile Pre smartphone, which has proven popular with customers, the subscriber losses slowed from 991,000 in the second quarter and 1.25 million in the first quarter.

Sprint Chief Executive Dan Hesse called the sequential improvement the best in more than five years, and said he expected a smaller postpaid subscriber loss again in the fourth quarter.

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The results are a far cry from the numbers put out by AT&T [T Loading... () ] and Verizon Wireless [VZ Loading... () ], a venture of Verizon Communications and Vodafone Group. Between them, AT&T and Verizon Wireless added more than 3 million subscribers in the third quarter.

Still, the improvement in the postpaid business offset depressed quarterly financial results, analysts said.

"Although it generated lower financial results, certainly the highlight of the quarter was the improvement in postpaid customer losses," said Nelson.

Sprint's third-quarter loss widened to $478 million, or 17 cents a share, from $326 million, or 11 cents a share, a year earlier. Revenue fell about 9 percent to $8.04 billion.

Excluding items, Sprint posted a loss of 19 cents a share, according to Thomson Reuters I/B/E/S, compared with analyst estimates of a loss of 15 cents per share. Revenue was forecast at $8.09 billion.

While losing monthly-bill-paying wireless customers, Sprint continued to fare well with prepaid customers, adding some 666,000 of them in the quarter thanks partly to its Boost Mobile, a service that allows for unlimited calls and texting at a set monthly fee.

Still, investors worry that Sprint could be overly dependent on prepaid customers, a business that tends to be less profitable and less predictable than postpaid.

Also, the addition of the prepaid customers hurt the company on the cost side. It said that equipment subsidies rose to $950 million from $700 million a year ago, as it shipped more prepaid handsets as well as postpaid smartphones.