Sprint posted losses for both prepaid and postpaid phone connections in the second quarter, with the carrier’s standalone prospects looking bleak, according to NewStreet analysts.
Overall Sprint lost 175,000 net subscribers in the second quarter, when including wholesale and affiliate. Sprint's combined prepaid and postpaid phone Q2 net losses totaled 297,000. The carrier reported postpaid net additions of 134,000, including 262,000 data devices in the period. However, that was partially offset by postpaid phone net losses of 128,000. Sprint is having trouble keeping customers as its churn level continues to be significantly worse than other national carriers’. In Q2 Sprint’s postpaid phone churn hit 1.78%. The nation’s fourth-largest carrier also lost 169,000 prepaid customers in the most recent quarter.
“One might suspect mgmt. of having an interest in showing weaker results given the pending deal, but churn doesn’t lie,” wrote NewStreet analyst Jonathan Chaplin in a Friday research note, adding that Sprint’s churn level is increasing at an accelerating rate.
Wireless service revenue for the quarter was $5.32 billion, down 2.5% year over year. Sprint recorded a net loss of $111 million and adjusted EBITDA of $3 billion was down 6%.
"While we delivered good results in the first quarter relative to expectations, the business still faces several structural headwinds and I remain convinced the merger with T-Mobile is the best outcome for our customers, employees, industry and all stakeholders," said Sprint CEO Michel Combes, in a statement. "With the recent clearance of our merger by the Department of Justice, and the anticipated approval from the FCC, we are moving one step closer to building one of the world’s most advanced 5G networks and providing American consumers a better network and overall experience at New T-Mobile."
Sprint management didn’t hold an earnings call this quarter and the company faces more delays as it pushes to secure approval for its pending $26.5 billion merger with T-Mobile.
While blessed last week by the U.S. Department of Justice, the merger deal still faces a lawsuit from a group of state attorneys general. Texas on Thursday became the latest state to join the lawsuit, making its state AG the fifteenth to do so.
A trial date scheduled to start Oct. 7 has been pushed back until Dec. 9, so states have time to review terms of the DoJ-approved deal, according to Reuters. That deal includes divesting Sprint’s prepaid brand Boost Mobile, along with spectrum assets, to Dish Network which has committed to building its own facilities-based 5G network and competing as a fourth national carrier.
Even though Sprint’s second-quarter results beat what were already low expectations, NewStreet Research analysts say Sprint remains troubled without the T-Mobile deal.
“Sprint has solid upside if the deal goes through, but increasingly looks beyond repair if it doesn’t,” wrote Chaplain.
MoffettNathanson analysts also don’t have a favorable view of Sprint on its own before a restructuring.
“Sprint is losing phone subscribers, EBITDA is falling, and free cash flow remains negative,” wrote senior analyst Craig Moffett in a Friday note. “As a standalone entity, their balance sheet is untenable.”
Sprint’s merger partner, meanwhile, posted another quarter of strong results. T-Mobile added 710,000 postpaid phone connections and 131,000 prepaid additions in Q2, with record-low postpaid phone churn of 0.78%.