Sprint Nextel Corp. and T-Mobile USA Inc. have had very divergent luck recently in trying to operate in the shadow of their two larger rivals, AT&T Mobility and Verizon Wireless.
Sprint Nextel, which in customer numbers is a strong No. 3 behind the big two, has spent the past several quarters trying to stymie the flow of its valuable iDEN customers, who are taking their phone numbers to the competition in mass. The migration has impacted the carrier’s growth, which in many cases has only managed to post positive customer additions on the back of its Boost Mobile prepaid offering and the success of its mobile virtual network operator partners.
T-Mobile USA, on the other hand, has chugged along quarter by quarter, adding between 800,000 and 1 million subscribers-and at the same time racking up accolades from customer studies conducted by J.D. Power and Associates.
The recently completed second quarter is a prime example of their respective plights. T-Mobile USA, which counted half as many customers as Sprint Nextel mid-year, managed to add twice as many subscribers to its network.
Sprint Nextel struggles
Sprint Nextel continued to show signs of turning around its customer growth challenges, saying it added 400,000 subscribers during the second quarter. While the results pale in comparison to the more than 1 million customers added by AT&T Mobility and Verizon Wireless, the results were also well short of the 708,000 customers Sprint Nextel added during the second quarter of 2006.
Like recent quarters, Sprint Nextel’s second-quarter customer growth was on the back of its Boost Mobile prepaid service and wholesale channels. The carrier said it added 169,000 Boost customers during the quarter, including around 100,000 subscribers to Boost’s new Unlimited calling plan. The growth was less than half the 498,000 Boost customers the carrier added during the second quarter of 2006. Boost ended the quarter with 4.5 million total customers.
Sprint Nextel’s wholesale channels contributed 155,000 subscribers during the second quarter and ended the period with 7 million total wholesale customers on its network.
IDEN impact
However, direct postpaid growth continued to stumble as the carrier said its 16,000 direct postpaid subscriber growth reflected a gain on its CDMA side offset by losses of iDEN customers. Sprint Nextel said it ended the quarter with 54.1 million total customers, including 25.3 million direct postpaid CDMA customers, 15.5 million postpaid direct customers on its iDEN network and 850,000 customers using the carrier’s iDEN/CDMA Powersource handsets.
Churn steady, up at Boost
Postpaid customer churn remained steady year-over-year at around 2%, while churn from its Boost operations increased from 6% last year to 6.8% this year. Postpaid average revenue per user dropped 2% year-over-year to $60, which Sprint Nextel attributed to a drop from its iDEN customers that overshadowed an increase on the CDMA side. Boost’s ARPU dropped a more dramatic 9% year-over-year to $31. Data services accounted for $9.75 of postpaid ARPU during the quarter, with CDMA data ARPU reported at $12.75.
Sprint Nextel’s total revenues increased 2% year-over-year to $10.2 billion driven by a 3% increase in wireless revenues to $8.8 billion. Despite the revenue growth, net income plunged 94% year-over-year from $291 million during the second quarter of 2006 to $19 million this year. The carrier attributed the drop to “lower contribution from operations, startup costs associated with the WiMAX initiative and increased net interest expense.”
T-Mobile USA triumphs
T-Mobile USA continued to truck along as the industry’s No. 4 carrier, but the third fastest-growing operator during the second quarter adding 857,000 new customers to its network and ending the period with nearly 27 million total customers.
Postpaid users total 80%
T-Mobile USA’s second-quarter growth outpaced the 613,000 subscribers it added during Q2 2006, but fell short of the nearly 1 million subscribers added during the first quarter of this year.
The carrier noted that postpaid customers accounted for 80% of new subscribers added during the most recent quarter, which was down from the 83% posted last year.
Customer churn dropped from 2.9% during the second quarter of 2006 to 2.7% this year, while postpaid churn dropped from 2.2% to 1.8% over the same time frame. Blended average revenue per user also improved from $52 last year to $53 this year, with data ARPU jumping from $5.70 last year to $7.80 this year.
The strong year-over-year customer growth and modest ARPU gains helped propel T-Mobile USA’s revenues more than 13% from $4.2 billion during the second quarter of 2006 to $4.8 billion this year. Net income also increased from $233 million in 2006 to $350 million this year.
