Sprint inks deal with Clearwire, predicts up to $8B in value from iPhone

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Sprint Nextel (NYSE:S) reported a narrowing loss in the third quarter and improving customer acquisition numbers. But perhaps more importantly, the company provided insight into its agreement with Apple (NASDAQ:AAPL) to sell the iPhone, and its steps toward a possible LTE agreement with Clearwire (NASDAQ:CLWR).

Click here for key charts from Sprint's third quarter.

"We expect the lifetime value of a typical iPhone customer to be at least 50 percent--yes, at least 50 percent--greater than a typical smartphone user, driven primarily by more efficient use of our network and lower churn," said CEO Dan Hesse, who likened Sprint to the struggling baseball team in the recent movie "Moneyball" and the iPhone to the expensive player brought on to help the team succeed. "The iPhone has an expensive contract, but he's worth every penny."

Sprint executives said the carrier expects to sell more than 1 million iPhones in the fourth quarter.

Sprint executives said the carrier expects $7 billion to $8 billion in "net present value" during the carrier's 4-year contract with Apple--carrier executives said the iPhone generates 20 percent higher monthly margins than other devices. Moreover, the carrier said it expects the iPhone to account for 20 percent to 40 percent of its postpaid gross additions and upgrades during that period.

Interestingly, Sprint executives said the carrier has a $15.5 billion 4-year contract with Apple, which is subject to a variety of factors including the number of models offered, and that Sprint expects to "outperform" that contract.

Sprint launched the iPhone earlier this month, joining Verizon Wireless (NYSE:VZ) and AT&T Mobility (NYSE:T) in selling the device. Sprint has said that the main reason customers leave the carrier is to obtain the iPhone.

Separately, Sprint announced it signed an agreement with Clearwire that essentially will allow the companies to work together toward a joint LTE network.

"We're pleased to announce we've signed a non-binding cooperation agreement with Clearwire to work together on technical specifications for the Clearwire LTE network and to ensure a superb customer experience for Sprint customers on the Clearwire LTE network," Hesse said, noting the agreement covers cell site selection, site builds, chipsets for devices and is intended to assure seamless handoffs between Sprint's network and Clearwire's LTE network.

The news offers a bright spot for Clearwire, which was left out of Sprint's initial LTE announcement earlier this month. Sprint intends to deploy LTE on its 1900 MHz spectrum and to launch commercial service in the middle of next year.

Hesse said the new agreement between Sprint and Clearwire paves the way for the companies to work together to deploy LTE, but does not represent a final contract to that effect. Clearwire has said it needs an additional $600 million to build an LTE-Advanced network across two-thirds of its current WiMAX network footprint.

Here's a look at a few other key metrics from Sprint's third quarter:

Subscribers: In the third quarter, Sprint added nearly 1.3 million net wireless customers, including net additions of 441,000 retail subscribers and net additions of 835,000 wholesale and affiliate subscribers as a result of growth in MVNOs reselling prepaid services. However, Sprint lost around 44,000 net postpaid subscribers during the quarter, narrower than the carrier's loss of 107,000 in the third quarter of 2010. Sprint added 485,000 net prepaid subscribers during the quarter, which includes net additions of 839,000 prepaid CDMA customers, offset by losses of 354,000 net prepaid iDEN customers. Sprint ended the quarter with 53 million customers.

Churn: For the quarter, Sprint reported postpaid churn of 1.91 percent, down from the 1.93 percent it reported in the year-ago quarter. The carrier's prepaid churn was 4.07 percent, also down from the 5.32 percent it reported in the year-ago period.

ARPU: Sprint's wireless average revenue per user for postpaid customers increased year-over-year from $55 to $58. The carrier's prepaid ARPU of $27 for the quarter declined from $28 in the third quarter of 2010 and the second quarter of 2011.

Financials: Sprint reported operating income of $208 million and a net loss of $301 million. The carrier's wireless retail service revenues were $6.8 billion for the quarter.

Forecast: Sprint said it expects net postpaid subscriber additions for the full year 2011. The carrier also said it expects to improve total net wireless subscriber additions in 2011, as compared to 2010.

For more:
- see this release

Special Report: Wireless in the third quarter of 2011

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