UPDATED: iDEN moves, Pre could help Sprint Nextel in ’09

Although Sprint Nextel Corp.’s fourth-quarter earnings came with significant bad news, two analysts think better times are ahead for the nation’s No. 3 wireless provider.
Sprint Nextel churned more than 1 million customers during the quarter – 1.1 million postpaid users and 314,000 prepaid users. This hemorrhage pushed Sprint Nextel to a new low point, counting fewer than 50 million customers. At the end of 2008, the carrier served 49.3 million subscribers.
“Subscriber losses are still unacceptably high,” Sprint CEO Dan Hesse said during the earnings conference call.
The nation’s third-largest wireless provider also posted a $1.62 billion loss. This setback accounted for a loss of 57 cents per share. In these troubled economic times, Sprint Nextel also managed to spend more during the fourth quarter. Its capital expenditures reached $548 million, up substantially from the $485 million capex it posted during the third quarter. Churn rose slightly to 2.16% in the fourth quarter from third-quarter churn of 2.15%.
Bright spots
However, there were a few notes the carrier hit on key. Sprint Nextel paid $550 million toward its $21.6 billion debt during the fourth quarter. Further, the carrier reported a $56 postpaid average revenue per user (ARPU) and said data revenues contributed to more than $14.50 to overall postpaid ARPU. While the total ARPU was flat quarter to quarter, data ARPU was up $1 from Q3 to Q4. At $14.50, Sprint Nextel beat Verizon Wireless’s and AT&T Mobility in data ARPUs by about 50 cents and $1, respectively.
Sprint Nextel said it is taking measures to better its fortune in 2009. The carrier has made various announcements, promises, changes, etc. in hopes to alter its image and attract customers. And to save some dough, Sprint Nextel is in the process of cutting 8,000 employees. Sprint Nextel just launched Simply Everything + Mobile Broadband, a combination of its two popular plans for $10 cheaper. The carrier also has exclusive partnership to launch Palm’s new Pre device and its prepaid business, Boost Mobile, has launched a $50 a month all-you-can-eat plan to try to revitalize the its iDEN business.
Bill Ho, analyst at Current Analysis, thinks the new Boost unlimited plan and cheaper price tag will only help Sprint Nextel, and even improve its earnings.
“The Boost iDEN plan will probably help them out simply because they weren’t really competitive toward the end of Q4 in terms of the CDMA unlimited plan,” Ho said. “It contributed to the net growth, but they kind of turned it off. The price point was elevated and there was really no incentive to go there until right now. I expect Q1 to be pretty good for Boost and I expect churn to go down. Boost should be positive for them.”
To take some of the edge off, the carrier has also been pushing its efforts to improve customer service during this year, even though doing so can prove to be a daunting task; which Hesse touched on during the conference call.
“(Improving this) takes time, especially when the brand for customer service was tarnished back in 2007,” Hesse said. “It takes time for market perception to catch up to reality. We are trying to shorten this lag.”
Rumors have also spread that Sprint Nextel may offload its network operations.
Brent Iadarola, industry analyst at Frost & Sullivan, always sees a beacon of light with the Palm Pre.
“That will be a very positive point in 2009 for them,” Iadarola said. “Across the board, our team was impressed with the Palm Pre. It will be competitive for the iPhone.” Further, Iadarola continued that Sprint’s flat-rate pricing “is something that customers are increasingly attracted to.”
Should Sprint Nextel’s extra efforts not work, Ho said, the worry should start to set in.
“When will they cross the line from negative to positive in 2009?” Ho said. “Another 1 million loss is not a good sign. If in Q1 we see a continuing 1 million loss and then in Q2 another 1 million loss, I’d be worried.”