Sprint posts mixed quarter, with slower growth, improved financials; investors rejoice
Sprint continued its turbulent operational ride during its fiscal third quarter, posting mixed customer growth and financial results.
The nation’s No. 4 carrier said it added 491,000 net connections during the final three months of last year, which was about half the growth posted during the same period in 2014 and the previous quarter. However, the latest growth was led by 501,000 net additions from more financially lucrative postpaid connections, which was significantly more than the previous reporting periods, and more importantly included 366,000 postpaid “phone” connections.
Holding back overall connection growth was a loss of 491,000 prepaid customers during the latest quarter compared with a gain of 410,000 prepaid customers in 2014. Sprint also reported its wholesale and affiliate partners added 481,000 net connections during fiscal Q3, which was down slightly from the previous year.
Overall, Sprint ended 2015 with nearly 58.4 million total connections on its network compared with 54.9 million at the end of 2014.
Quarterly customer growth trailed that of both Verizon Wireless, which last week reported 1.4 million “retail” customer net additions, and that of T-Mobile US, which said it added 2.1 million total connections.
Customer churn results were also mixed, as postpaid churn plunged from 2.3% during the final three months of 2014 to 1.62% this year, but increased sequentially, while prepaid churn spiked year-over-year from 3.94% in 2014 to 5.82% last year.
Financially, Sprint reported $6.42 less spending per month per postpaid connection on service during its last fiscal quarter, dropping to $52.48, which the carrier attributed to the industry trend of supplanting device subsidies with lower monthly service pricing. Prepaid customers on average spent 32 cents more per month at $27.44 during the final three months of last year.
Taking into account monthly device payments and shared data lines, Sprint reported a $5.76 year-over-year increase in average billing per account to $167.11 during its latest quarter.
Overall revenues across the organization dropped nearly 10% year-over-year to $8.1 billion for its third fiscal quarter, with both service and equipment revenues taking a hit. At the same time, Sprint managed to trim more than $3 billion in operating expenses, which helped slash net losses from $2.4 billion during the final three months of 2014 to a loss of $836 million last year.
Adjusted earnings before interest, taxes, depreciation and amortization also improved from just over $1 billion to nearly $1.9 billion, with adjusted EBITDA margin nearly doubling year-over-year to 28.4%.
In funding future operations, Sprint said it was working with parent company SoftBank in setting up a “network-related financing entity” that will use network equipment and spectrum as collateral to provide up to $5 billion in 2016 funding. The first round of funding from the entity is expected to close by mid-year.
Sprint also said it could see up to $4 billion in payments through fiscal 2016 from its recently established Mobile Leasing Solutions division, which has already thrown off $1.1 billion in proceeds. The division was established last November and is tasked with handling the financial aspects of Sprint’s device leasing program in which the carrier provides devices to consumers for a monthly fee over a fixed term before exchanging that device for a new model.
Sprint investors seemed impressed with the carrier’s latest results, with Sprint’s stock trading up more than 10% early Tuesday, having last week hit a new 52-week low of $2.18 per share.
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