Sprint stems customer losses, squeaks out profit

As has been a recurring theme, Sprint reported quarterly results that highlight its continued struggles through an ongoing network upgrade program, but hints that perhaps it could be set to turn a corner.
(Sprint recently altered its fiscal quarters to align with new parent company Softbank, with its new fiscal year ending March 30. Comparisons in this story will be between its first fiscal quarter this year and its second fiscal quarter in 2013, both of which ended on June 30.)
For its first fiscal quarter, Sprint said it lost 334,000 total customers across its network, which was a sequential improvement from the 467,000 customers lost earlier this year and a substantial statistical improvement over the more than two million customers lost during the second quarter of last year boosted by the turn down of Nextel services.
Breaking down the numbers shows that Sprint’s direct operations suffered the brunt of the defections, with its postpaid base losing 181,000 customers and its prepaid base losing 542,000 subscribers. The postpaid losses were a turnaround from the year-ago quarter when Sprint posted a gain of 194,000 postpaid customers, but a sequential improvement. Prepaid losses increased significantly sequentially and year-over-year, which Sprint attributed to the “re-rating” of customers on its government-subsidized Assurance Wireless program.
The one bright side in terms of customer growth came from its wholesale and affiliate program, which managed to add 503,000 net customers during the quarter.
Analysts noted that Sprint’s continued customer troubles was surprising considering the carrier said it posted 535,000 net additions through tablet sales, which indicated weaker than expected handset-based net customer additions. Sprint did claim it sold nearly five million smartphones during the quarter, which accounted for 87% of retail handset sales for the quarter.
Overall, Sprint exited the most recent quarter with nearly one million more customers than it had mid-2013, sitting at just over 54.5 million total subscribers on its network.
Sprint’s year-over-year decline in postpaid customer growth was on the back of an increase in customer churn, which surged from 1.83% last year to 2.05% this year. This increase was attributed to its ongoing network upgrade program, which has impacted network quality. Taking into account the impact from last year’s Nextel turn down and transactions, postpaid churn dropped from 2.63% last year to 2.09% this year.
Prepaid customer churn dipped year-over-year from 5.22% to 4.44%, indicating prepaid losses were impacted by a drop in gross customer additions. The year-over-year decline was even more significant when taking into account Nextel and transactions dropping from 5.51% to 4.5%.
Financially, customer spending per month was a mixed bag. Postpaid average revenue per user dropped $1.94 year-over-year to $61.65, perhaps indicating strong customer acceptance of Sprint’s recently launched “Framily” plans. However, prepaid ARPU increased 95 cents year-over-year to $27.97.
That mixed spending cancelled out a larger customer base, with Sprint’s total revenues dropping $88 million year-over-year to $8.79 billion during the most recent quarter. Sprint did however manage to trim more than $1.5 billion in expenses, which reversed the previous $1.7 billion in net losses last year to a gain of $23 million this year. For the investment community, Sprint also managed to increase adjusted earnings before interest, taxes, depreciation and amortization from $1.4 billion last year to more than $1.8 billion this year.
That dip in expenses was boosted by a decrease in capital expenditures, which dropped from $1.9 billion during the second quarter of last year to just $1.4 billion this year. Sprint noted that it has mostly completed work on its Network Vision program, with the carrier’s LTE network covering 254 million potential customers at the end of the most recent quarter, to go along with reported increased performance of its legacy CDMA operations. This completion should see the carrier improve network quality, which will be apparent in its second-quarter financial results and should align with Sprint’s management claims that operational results could begin seeing fruits of that labor during the second half of this year.
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