Sprint Nextel’s (S) ongoing operational evolution remains ongoing as the carrier posted yet another quarter of mixed financial results, but promises of better days ahead.
During the first quarter, Sprint Nextel’s wireless operations posted a 7% increase in operating revenues to $7.95 billion compared with Q1 2011 results, but a $1 billion increase in expenses pushed its operating income from a return of $140 million last year to a loss of $331 million this year. A significant portion of those increased expenses came from device subsidies that surged from $1.1 billion in 2011 to $1.6 billion this year, which the carrier attributed primarily to the launch late last year of Apple’s iPhone device.
Sprint Nextel did note that capital expenditures surged more than 58% during the first quarter to $710 million as it moves aggressively with its Network Vision program. The carrier noted that it currently had 600 upgraded sites on air with plans to have 12,000 sites upgraded by the end of 2012. Sprint Nextel added that zoning requirements were completed for approximately 9,700 sites; leasing agreements have been completed for nearly 7,700 sites; more than 3,200 sites are in “notice to proceed status” and work has started on approximately 3,000 sites.
Analysts pointed out the carrier’s stronger than expected earnings before interest, taxes, depreciation and amortization margins of 13.9% across its operations as a hopeful sign for the carrier.
Sprint Nextel said it added 1.08 million net customers during the quarter, which was just slightly below the 1.12 million added in 2011. The 2012 results included the loss of 192,000 postpaid customers driven by increased deactivations from its iDEN platform that offset gains on the CDMA side; 489,000 net additions through its prepaid channels that saw declines across both its iDEN and CDMA offerings; and 785,000 net customer additions through its wholesale and affiliate channels that was down from the 954,000 customers added through those channels during the first quarter of 2011.
Sprint Nextel noted that its CDMA offering managed to add just over 1.9 million net customer additions during the quarter, which was just below the 2.05 million added in 2011, while its iDEN operations witnessed overall defections slow from a loss of 927,000 customers in 2011 to a loss of 836,000 customers this year. The carrier is in the process of shuttering its iDEN operations, noting it has removed approximately 1,300 iDEN cell sites with plans to shut down a total of 9,600 by the end of the third quarter. In attempting to retain those fleeing iDEN customers, Sprint Nextel said it managed to move approximately 46% of postpaid iDEN customers to its CDMA offering, an increase from the 27% retention during the first quarter of 2011.
Sprint Nextel ended the quarter with 56.1 million customers on its network, which was 5 million more than it ended the first quarter of 2011. It should be noted that its iDEN operations were down to serving just 5.4 million customers, compared with the approximately 18 million customers on that network following Sprint’s acquisition of Nextel communications in 2005.
Overall customer growth during the quarter was bolstered by a decrease in prepaid customer churn, which dropped from 4.36% in 2011 to 3.61% this year, while postpaid churn increased from 1.81% to 2.01%. Sprint Nextel noted the postpaid increase was due to higher involuntary deactivations, which it describes as “when Sprint disconnects a customer due to lack of payment or violations of terms and conditions.”
Average revenue per user results were mixed as postpaid ARPU was up $3.71 year-over-year to $59.88, while prepaid ARPU sagged $1.57 to $26.82.
Sprint Nextel’s stock shot out of the blocks this morning before settling down to basically unchanged by mid-day.
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