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Sprint adds 1.5M iPhones in Q1, will bring WiMAX to prepaid brands

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Sprint Nextel (NYSE:S) reported a narrower than expected first-quarter loss, and recorded 1.5 million Apple (NASDAQ:AAPL) iPhone activations during the quarter. Sprint CEO Dan Hesse also disclosed during the company's quarterly earnings conference call that its Boost Mobile and Virgin Mobile prepaid brands will gain access to Clearwire's (NASDAQ:CLWR) mobile WiMAX network sometime in the second quarter; he did not provide details. In December Sprint agreed to pay Clearwire a total of $926 million for unlimited access to its WiMAX network in 2012 and 2013, and Sprint will have access to the WiMAX network through at least 2015.

Click here for key slides from Sprint's first quarter.

Hesse said that the company made progress on its goals, but that it still has a great deal of work to do on executing. As he said on the company's fourth-quarter earnings call, Hesse noted that the company is now in the second phase of its turnaround this year, which involves "investment for future growth" via the iPhone and its Network Vision network modernization plan.

Sprint reported a net loss of $863 million, up from a loss of $439 million in the year-ago period. However, that was less than what analysts had been expecting, according to Bloomberg

Here is a breakdown of Sprint's key quarterly metrics:

iPhone: Sprint added 1.5 million iPhones in the quarter. Although this was lower than the 1.8 million iPhones Sprint had in the fourth quarter, Sprint's first quarter of iPhone availability, the carrier said that it had a higher percentage of new customers sign up for the iPhone in the first quarter. Sprint said that 44 percent of its iPhone customers, or around 660,000, were new customers, compared with 40 percent, or 720,000, in the fourth quarter of 2011. Sprint has banked on keeping its unlimited smartphone data plans as a way to differentiate its iPhone offerings from those of Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T). AT&T added 4.3 million iPhone customers in the first quarter and Verizon added 3.2 million iPhone activations in the first quarter.

Hesse said that 40 percent of Sprint's iPhone customers in the first quarter, or around 600,000 customers, broke a contract with another carrier to get to Sprint, and that over 60 percent of the new iPhone customers who left another carrier would not have considered switching to Sprint if the company did not have the iPhone. He said that customer care calls for new iPhone customers have been low and that long-term iPhone customers will lead to lower churn.

Network Vision: Sprint said it is on track to launch LTE service in six metropolitan areas by mid-year via its Network Vision plan: Atlanta, Baltimore, Houston, Dallas, Kansas City and San Antonio, Texas. The company did not disclose any future LTE markets beyond that but Hesse said the carrier will add LTE markets as soon as it can. Around 3,000 Network Vision cell sites are under construction in 17 markets, according to Steve Elfman, president of network operations at Sprint. Sprint expects to have around 12,000 cell sites with new multi-mode base stations online by year-end. Further, in the 600 Network Vision sites currently online, Elfman said Sprint is seeing double the coverage range compared with legacy sites, which should help reduce roaming costs. Sprint is also able to repurpose 2.5 MHz to 3 MHz of spectrum on its 800 MHz band from Nextel iDEN service to voice, he said. Sprint now targets taking 9,600 iDEN cell sites off air by the end of the third quarter, earlier than expected.

Subscribers: Sprint served 56.1 million total customers at the end of the quarter, its highest level ever. Sprint added 1.1 million total net customer additions in the first quarter, its sixth consecutive quarter with more than 1 million net subscriber additions. Sprint added 263,000 net postpaid customers to its "Sprint platform" (which includes CDMA, WiMAX and LTE) during the quarter, but lost 455,000 net postpaid customers on its "Nextel platform" (iDEN), leading to a total postpaid net subscriber loss of 192,000.

The company added 489,000 net prepaid subscribers during the quarter, which includes net additions of 870,000 prepaid Sprint platform customers, offset by net losses of 381,000 prepaid Nextel platform customers. For the quarter, the company added net additions of 785,000 wholesale and affiliate subscribers (all of which are on the Sprint platform) as a result of growth in MVNOs reselling prepaid services.

Churn: The carrier's total retail postpaid churn was 2.01 percent, compared with 1.81 percent for the year-ago period and 1.98 percent for the fourth quarter of 2011. Sprint's total prepaid churn was 3.61 percent, down from 4.36 percent in the year-ago quarter and 3.68 percent in the fourth quarter of 2011.

ARPU: Sprint's total retail postpaid average revenue per user in the quarter was $59.88, up from $56.17 in the quarter, the largest year-over-year postpaid ARPU growth in the company's history. Sprint said that increased smartphone penetration and the company's $10 smartphone add-on charge benefited ARPU. Sprint said around 59 percent of its Sprint platform postpaid base now has a smartphone. Total retail prepaid ARPU was $26.82, down from $28.39 in the year-ago period. Sprint said the decline in the year-over-year retail prepaid ARPU is a result of a greater mix of Assurance Wireless customers who on average have lower ARPU than the rest of Sprint's prepaid subscriber base.

Financials: Sprint's operating revenues climbed to $.8.7 billion in the quarter, up from $8.3 billion in the year-ago period. The carrier said wireless retail service revenues clocked in at $7.1 billion for the quarter, an increase of 7 percent compared to $6.6 billion in the year-ago period. 

For more:
- see this release
- see this Bloomberg article
- see this Reuters article

Special Report: Wireless in the first quarter of 2012

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