Sprint officially lost the No. 3 position to T-Mobile US despite quarterly results exceeding expectations
On the heels of a massive management shakeup, Sprint posted mixed first fiscal quarter financial results with just enough positive to get investors excited.
The carrier said it added 675,000 net connections to its network for the quarter ended June 30, which was a substantial turnaround from the 220,000 connections lost in the same period in 2014, although about half of what it did the previous quarter.
Growth was led by wholesale and affiliates, which generated 731,000 net connections for the latest quarter. Direct postpaid service generated 310,000 net additions, boosted by “connected devices” such as tablets, which offset a loss of 12,000 “phone” connections for the quarter. Sprint noted that despite the full-quarter results, it managed to post net phone additions for both May and June. Direct prepaid services lost 366,000 connections, which was an improvement when compared with the 542,000 connections lost last year that Sprint attributed to fewer losses in its Assurance brand.
Growth numbers came in just ahead of analyst expectations, and Sprint said it was net port positive for the second consecutive quarter.
Sprint’s improved postpaid performance was attributed to a significant drop in customer churn from 2.05% last year to 1.56% this year, and a 13% increase in gross customer additions. Prepaid churn went the opposite direction, surging from 4.44% last year to 5.08% this year, highlighting the increasingly competitive nature of the prepaid market.
Sprint said it ended the quarter just short of 57.7 million connections on its network, officially ceding the No. 3 position in the domestic mobile market to T-Mobile US, which ended the quarter with 2.1 million new connections and 58.9 million total connections on its network. T-Mobile US last year claimed it overtook Sprint as the nation’s No. 1 facilities-based prepaid service provider.
Sprint has aggressively targeted new customers with competitively priced rate plans that impacted average revenue per user, which dropped $6.59 year-over-year on the postpaid side to $55.48, but managed to increase by 43 cents on the prepaid side to $27.81.
Overall revenue across operations dropped from $8.8 billion last year to $8 billion this year, which Sprint attributed to customers moving toward device financing-based rate plans and a lower smartphone base. Net expenses dropped by a larger percentage, which helped improve net losses from $224 million last year to just $20 million this year.
Strictly looking at its wireless business, revenue dropped from $8.2 billion last year to $7.5 billion this year, which was in line with estimates. Operating expenses also declined from $7.6 billion to $7 billion, resulting in a small drop in operating income from $558 million last year to $542 million this year.
Sprint reported that adjusted earnings before interest, taxes, depreciation and amortization increased from $1.8 billion last year to $2.1 billion this year, with its adjusted EBITDA margin surging from 25.3% to 31.7%.
Wireless capital expenditures increased from $1.1 billion last year to $1.6 billion this year, with Sprint also reporting an additional $544 million in capex attributed to leased devices.
Investors appeared overall pleased with Sprint’s performance, with the carrier’s stock price (S) trading up more than 5% early Tuesday. Sprint’s stock had taken a beating over the past several weeks following strong quarterly results from its rivals.
Sprint’s stock also appeared to receive a boost from the company’s move yesterday to replace a number of its top executives. These moves included naming a new CFO, COO and CTO, and was a continuation of a general clearing out of executives tied to former CEO Dan Hesse.
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