Sprint Nextel (NYSE:S), in the midst of extricating itself from its legacy iDEN Nextel business, posted a net subscriber loss of 337,000 wireless customers in the fourth quarter. The carrier also reduced its LTE buildout plans for 2013.
Click here for key slides from Sprint's fourth-quarter earnings report.
Sprint, which first launched LTE in mid-July 2012, now offers LTE in 58 cities. The carrier said it now expects to cover 200 million POPs with LTE by the end of 2013. That is significantly lower than Sprint's original goal of having 250 million POPs covered with LTE by the end of the year. That target also now puts Sprint on the same pace as T-Mobile USA, which plans to have 200 million POPs covered with LTE by the end of the year.
AT&T currently covers 174 million POPs with LTE, and plans to hit at least 250 million POPs by the end of 2013. Verizon now covers 273.5 million POPs with LTE, or roughly 89 percent of the U.S. population. Verizon expects to finish its initial LTE deployment by mid-year.
In Sprint's fourth quarter subscriber figures, once again losses on Sprint's Nextel iDEN network outweighed gains the company is making on its "Sprint platform" for its CDMA and LTE networks. Sprint plans to shut down its iDEN network by the middle of 2013 as part of its Network Vision network modernization upgrade. Sprint CEO Dan Hesse has said that the company expects iDEN subscriber losses to accelerate as it moves toward the shutdown. Sprint was able to recapture 51 percent of leaving Nextel postpaid subscribers to its Sprint platform, down from 59 percent in the third quarter; Sprint has also said that this recapture rate will decrease as the shutdown nears.
Sprint is hoping to regain momentum on CDMA and LTE after iDEN is shuttered. Key to that effort will be Softbank, which plans to purchase 70 percent of Sprint in a deal valued at $20.1 billion. Sprint is also working on its own $2.2 billion deal to buy Clearwire (NASDAQ:CLWR), which Clearwire's minority shareholders must still approve. Both deals also still require regulatory approval.
Due to securities laws, Sprint executives could not go into many details on the Softbank or Clearwire deals. Hesse said on the company's earnings conference call that the Softbank deal will act as a "catalyst" for Sprint in terms of improving its network and competitiveness. He also noted that U.S. Cellular (NYSE:USM) agreed sell some of its major Midwestern markets and spectrum to Sprint. "We believe that Sprint will emerge as a more competitive company," he said.
Here is a breakdown of Sprint's key quarterly metrics:
iPhone: Sprint saw a jump in the number of Apple (NASDAQ:AAPL) iPhone activations, posting 2.2 million in the quarter, up from the 1.5 million it had in each of the first three quarters of 2012. Sprint activated more than 6.6 million iPhones in all of 2012, with 40 percent to new customers. In the fourth quarter 38 percent of Sprint's iPhone activations were to new customers.
To put those numbers into perspective though, AT&T Mobility (NYSE:T) activated 8.6 million iPhones in the fourth quarter alone and Verizon Wireless (NYSE:VZ) sold 6.2 million iPhones in the fourth quarter. Both companies are about twice the size of Sprint in terms of subscribers.
In terms of all smartphones, Sprint sold 6.1 million smartphones in the quarter, which represented 77 percent of retail Sprint platform handset sales and 89 percent of Sprint platform postpaid handset sales. As of the end of the fourth quarter, Sprint had sold more than 4 million LTE smartphones.
Network Vision: Steve Elfman, president of network operations at Sprint, said that by the end of the first quarter the carrier expects to upgrade a total of 12,000 base stations--one quarter later than previously expected. To date, he said Sprint has more than 8,000 Network Vision sites on air, and that the number of sites that are either ready for construction or already underway has grown to 19,500, around half the total number of sites to be upgraded.
Interestingly, Elfman said that Sprint now plans to deploy LTE on its 800 MHz iDEN spectrum in the fourth quarter of 2013, earlier than previous plans for a deployment in early 2014. Sprint is also starting to deploy CDMA voice service its 800 MHz spectrum, Elfman said.
Subscribers: Sprint added 401,000 postpaid subscribers to its CDMA and LTE networks in the quarter, which marked the 11th consecutive quarter of additions in Sprint postpaid customers. However, Sprint's postpaid additions were down from 410,000 in the third quarter of 2012 and the 539,000 it had in the fourth quarter of 2011, the first quarter it offered the iPhone. Sprint reported net prepaid Sprint platform subscriber additions of 525,000 in the quarter, down from 899,000 in the year-ago period but up from 459,000 in the third quarter.
Sprint also reported a loss of 243,000 net wholesale customers in the quarter, the first time it posted losses in that category in three years. Sprint CFO Joe Euteneuer said that this was primarily due to wholesale customers eliminating inactive accounts in fourth quarter and regulatory changes related to the Lifeline program from low-income customers. Euteneuer said wholesale customer losses will likely continue into the first half of 2013 before rebounding in the second half.
Despite additions on the Sprint platform, Sprint was weighed down by Nextel platform subscriber losses. The company reported net iDEN losses of 1.02 million customers, which included 644,000 postpaid losses and 376,000 prepaid losses. A third of remaining iDEN customers left the platform in the quarter. Sprint has been 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).
Sprint ended the year with 53.5 million customers on its Sprint platform, its highest ever. The company ended the year with a total of 55.6 million customers.
Churn: Sprint's total retail postpaid churn was 2.18 percent, up from 1.98 percent in the year-ago period and 2.09 percent in the third quarter of 2012. Hesse said the figure is higher than Sprint would like. Sprint's total retail prepaid churn was 3.30 percent, compared with 3.68 percent a year ago and 3.37 percent in the second quarter. The prepaid churn number was Sprint's best ever.
ARPU: The company said total wireless postpaid average revenue per user increased to $61.47, up from $58.59 in the year-ago period and $61.19 in the third quarter of 2012. Sprint platform postpaid ARPU was $63.04, its highest ever, and up from $61.22 in the year-ago period. Sprint said that improvement was its best year-over-year. Total prepaid ARPU was $26.69, up from $26.62 in the fourth quarter of 2011 but down from $26.77 in the third quarter of 2012.
Financials: Sprint reported a net loss of $1.32 billion, wider than the year-ago loss of $1.3 billion. As in the third quarter, Sprint partially blamed the decline on the ongoing dismantling of its iDEN network. The company's net revenue, however, rose to $9 billion from $8.72 billion in the year-ago period. Wall Street expected $8.92 billion in revenue, according to Thomson Reuters. Sprint's total service revenue climbed to $7.26 billion, up from $7.01 billion in the year-ago period.
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