Sprint adds 1.5M iPhones in Q2, speeds up Nextel cell site shutdown

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Sprint Nextel (NYSE:S) added a net 283,000 customers in the quarter as it migrated customers off its legacy Nextel iDEN network and onto its CDMA network. The company is now fully in the midst of decommissioning its iDEN network and said is ahead of pace in shutting down the network, which it expects to do as soon as June 30, 2013.

Click here for key slides from Sprint's second quarter earnings presentation.

"We are early in the second phase of the turnaround, investing for future growth," Sprint CEO Dan Hesse said on the company's earnings conference call. "We know we have much work ahead to achieve the results we and our investors want."

Sprint reported a net loss of $1.37 billion, larger than analyst had expected, according to Bloomberg, and wider than the $847 million it reported in the year-ago period. However, Sprint said the results include accelerated depreciation of $782 million, primarily related to Network Vision, including the expected shutdown of the Nextel network.

Hesse was asked about Verizon Wireless' (NYSE:VZ) and AT&T Mobility's (NYSE:T) recently announced shared data plans. He said that Sprint is still assessing the plans but right now has no intention of following them with a shared plan of its own. "What we want our rate plans to stand for is simplicity and value," he said. "Unlimited is still a significant differentiator."

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

iPhone: Sprint maintained its momentum with Apple's (NASDAQ:AAPL) iPhone, selling 1.5 million iPhones during the period, including 40 percent to new customers. In the first quarter Sprint also had 1.5 million iPhone sales, and said 44 percent of those were new customers to Sprint. Hesse said that the iPhone is paying off for Sprint in the form of lower churn among iPhone customers and fewer calls to customer service.

Verizon and AT&T saw sequential declines in iPhone sales in the second quarter, though it should be noted that they added significantly more iPhone customers than Sprint. Verizon activated 2.7 million iPhones in the quarter, down from 3.2 million in the first quarter. AT&T had 3.7 million iPhone activations in the second quarter, down from 4.3 million in the first quarter.

Network Vision: Sprint said its Network Vision network modernization remains on track. So far the company has taken 9,600 Nextel iDEN cell sites off the air, earlier than previous guidance of doing so by the end of the third quarter. Sprint said it has completed the "thinning" of its iDEN network for this year. Steve Elfman, president of network operations at Sprint, noted that the Nextel network was built for 20 million customers, and that there are now 4.4 million iDEN customers remaining, down from 6 million at the end of the first quarter.

So far the company has completed leasing agreements for more than 12,700 Network Vision sites and zoning requirements for nearly 13,900 sites. Additionally, Sprint said nearly 6,300 sites are either ready for construction or already underway, and the company said more than 2,000 sites are on air and meeting speed and coverage enhancement targets. Sprint said it expects to bring 12,000 sites on air with new multi-mode base stations by the end of 2012, and it will complete the majority of its Network Vision buildout by the end of 2013.

As part of Network Vision, Sprint has launched LTE service in in five major metropolitan areas: Atlanta, Dallas, Houston, Kansas City and San Antonio, as well as a number of smaller, surrounding markets. Sprint will launch LTE in four additional cities before Labor Day: Baltimore;  Gainesville, Ga.; Manhattan/Junction City, Kan.; and Sherman-Denison, Texas.

In an interview with FierceWireless, Hesse said that Sprint's LTE network is producing speeds comparable to Verizon and AT&T's larger LTE networks. He said that even though Verizon and AT&T are using more spectrum and wider channels for their LTE networks, Sprint does not need as much spectrum since the other carriers have around twice as many total customers. He also noted that Clearwire's (NASDAQ:CLWR)  TDD-LTE network, which will come online next year, will help Sprint offload some traffic in certain areas of its network with high data traffic. Hesse said Sprint and Clearwire are working to ensure that Sprint's FDD-LTE network and Clearwire's network are can interoperate, on both device chipsets and at the network level.

Subscribers: Sprint said it served around 56.4 million customers at the end of the second quarter of 2012, its highest subscriber total ever. Sprint added a net of 283,000 wireless customers in the quarter. The Sprint platform (which includes CDMA, WiMAX and LTE) added 442,000 net postpaid customers during the quarter, but the Nextel platform (iDEN) lost 688,000 net postpaid customers in the quarter. However, the carrier said that 431,000 postpaid subscribers moved from the Nextel platform onto the Sprint platform during the quarter.

Sprint said that overall it recaptured 60 percent of the Nextel postpaid customers in the quarter, which analysts had said would be a key item to watch for (Sprint recaptured 46 percent of Nextel postpaid customers to the Sprint platform in the first quarter). Sprint CFO Joe Eueteneuer said during the next two quarters Sprint expects to capture around 40 percent of leaving iDEN postpaid customers to the Sprint platform, but that figure may drop off after that. Sprint is currently working to migrate its iDEN users onto its CDMA network, where it offers an enhanced Direct Connect push-to-talk service developed by Sprint and Qualcomm (NASDAQ:QCOM).

On prepaid, Sprint added 141,000 net prepaid subscribers during the quarter, which includes net additions of 451,000 prepaid Sprint platform customers, offset by net losses of 310,000 prepaid Nextel platform customers. Sprint said 143,000 prepaid customers moved from its Nextel platform onto its Sprint platform during the quarter.

The company also reported net additions of 388,000 wholesale and affiliate subscribers (all of whom are on the Sprint platform) as a result of growth in MVNOs reselling prepaid services.

Churn: Sprint's total retail postpaid churn was 1.79 percent, compared to 1.75 percent in the year-ago period and 2.01 percent in the first quarter of 2012. The carrier reported a record-low Sprint platform postpaid churn of 1.69 percent, compared to 1.72 percent for the year-ago period and 2 percent for the first quarter of 2012. Sprint's total retail prepaid churn was 3.53 percent, compared to 4.14 percent a year ago and 3.61 percent in the first quarter.

ARPU: Sprint's total retail postpaid average revenue per user in the quarter was $60.88, up from $56.67 in the year-ago quarter and $59.88 in the first quarter of 2012. Sprint platform postpaid ARPU was a best-ever $63.38, up from $59.07 a year ago and $62.55 in the first quarter. Total retail repaid ARPU decreased to $26.59 from $27.53 in the year-ago quarter and $26.82 in the first quarter.

Financials: Sprint's total revenue increased 6 percent year-over-year to $8.84 billion. Wireless retail service revenues clocked in at $7.2 billion for the quarter, an increase of 7 percent compared to the year-ago quarter and an increase of 1 percent compared to the first quarter of 2012.

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

Special Report: Wireless in the second quarter of 2012

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