As expected, Sprint had a rough second quarter with significant customer defections and operational challenges, though its recent acquisition by Japan’s Softbank is expected to help pull the carrier out of its funk.
Sprint reported that it lost more than 2 million customers during the second quarter, a result impacted by the turn down of its iDEN network at the end of the quarter that resulted in the loss of 1.3 million customers. However, the iDEN move was not the only dog during the quarter as the carrier posted customer losses across all platforms save its postpaid CDMA/LTE operations, which managed to add 194,000 customers.
Sprint’s Q2 results did include 411,000 customers tied to its acquisition of assets from U.S. Cellular that closed during the quarter, but did not include approximately 228,000 “connected devices” added during the quarter. Sprint noted that it ended the quarter with more than 3.8 million of these connections.
The customer defections were significantly higher than the 415,000 customers Sprint lost during the first quarter of the year and a turnaround from the 283,000 customer additions posted during the second quarter of 2012. Sprint ended the latest quarter with 53.6 million customers on its network, down from the 56.4 million it had at the same point last year.
More troubling in the near term is that Sprint’s closest rivals all posted strong customer gains during the second quarter, with Verizon Wireless adding more than 1 million customers, AT&T Mobility adding 632,000 subscribers to its network and T-Mobile US hinting it will post strong results when it releases Q2 numbers on Aug. 8.
Analysts in general were not surprised by Sprint’s customer issues, with many expecting the iDEN situation and continuing competitive pressure tied to T-Mobile US gaining access to Apple’s iPhone during the quarter to severely impacting Sprint’s results. That expectation was seen in Sprint’s stock (S) actually gaining value early Tuesday, which many tied to predictions that the carrier may have bottomed out during the second quarter.
The impact of the iDEN de-commissioning was apparent in customer churn results, which increased year-over-year from 1.79% to 2.63% on the postpaid side and from 3.53% to 5.51% on the prepaid side. Specifically, iDEN churn was 33.9% on the postpaid side and 32.13% on the prepaid side during the quarter, though Sprint’s CDMA/LTE platforms also posted elevated churn results. Sprint added that its recapture rate of iDEN customers to its CDMA/LTE platform dropped sequentially on the postpaid side from 46% to 34%, while on the prepaid side it actually improved from the first quarter’s 34% to 39%.
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