Q3: Sprint continues to lose postpaid subscribers

Although the bleeding slowed, Sprint Nextel reported continued postpaid subscriber losses in the third quarter. The company's prepaid business had another strong quarter, but Sprint's net loss widened and it saw a drop in revenue in the quarter. During the company's earnings conference call, Sprint CEO Dan Hesse highlighted the fact that the company's net retail subscriber numbers were the best in two years, and also touted the carrier's smartphone lineup, which now includes the Palm Pre, Research In Motion's BlackBerry Tour, the HTC Touch Pro 2, the HTC Hero (Sprint's first Android phone) and the Samsung Moment (Sprint's second Android phone).

However, Hesse acknowledged the company would have to improve on the subscriber front. Here's a breakdown of some of Sprint's key metrics:

Subscribers: Sprint said net retail subscribers declined by 135,000 and net wireless customers declined by around 545,000, including net losses of 801,000 postpaid customers. The postpaid loss is down from 991,000 postpaid subscriber losses in the second quarter. The company gained a net 801,000 prepaid iDEN customers, which was offset by net losses of 135,000 prepaid CDMA customers. Sprint also had a net loss of 410,000 wholesale and affiliate subscribers because of subscriber losses from its MVNO partners and machine-to-machine devices. Sprint had a total customer base of 48.3 million customers at the end of the quarter, compared with 48.8 million at the end of the second quarter.

"So if we can get churn under control and make further improvements in churn, and also increase gross adds--we'll need to do both," Hesse said in an interview with FierceWireless. "They'll both need to contribute, significantly, to get our net add numbers positive on the postpaid side. And of course what's helping mitigate, from a revenue perspective and an earnings perspective, the decline in postpaid is the strong growth we're getting in prepaid."

Financials: Total revenue fell 9 percent to $8.04 billion, down from $8.81 billion in the year-ago quarter. Wireless service revenues for the quarter of $6.3 billion declined 8 percent year-over-year and 2 percent sequentially. Sprint said the year-over-year and sequential decline was due to fewer postpaid subscribers, partially offset by more prepaid subscribers. Sprint had a net loss of $478 million million, up from $326 million in the year-ago quarter.

ARPU: Sprint said postpaid ARPU remained stable at $56--where it has been for the past seven quarters--primarily due to continued growth in fixed-rate bundled plans like Simply Everything, and offset by declines in usage and roaming. Data revenues contributed more than $16.25 to overall postpaid ARPU in the third quarter, led by growth in CDMA data ARPU. Prepaid ARPU in the quarter was around $35, up from $31 in the year-ago period and $34 in the second quarter.

Churn: Postpaid churn was 2.17 percent, up from 2.15 percent in the year-ago period and 2.05 percent in the second quarter. Sprint said the sequential increase was due to "seasonality" and heightened competition. Prepaid churn was 6.65 percent, down from 8.16 percent in the year-ago period but up from 6.38 percent in the second quarter. The company said the year-over-year improvement in prepaid churn was due to increased subscriber additions to its Boost Monthly Unlimited offering.

Consolidation: Hesse addressed the issue of industry consolidation, following rumors in September that Deutsche Telekom might be considering a bid for Sprint. He noted there was intense competition in the U.S. wireless market, and said it was "hard to say if there will be more consolidation, particularly among the major players."

4G: Hesse also touted the company's commitment to 4G through its relationship with Clearwire, in which it holds a majority stake. He noted that Sprint has launched its Sprint 4G service in 17 markets as a wholesale customer of Clearwire's, and that Clearwire intends "to continue to raise funds for what we consider an aggressive buildout" of its mobile WiMAX network. "Sprint is able and supportive of funding our proportionate share" if Clearwire needs more funds for its buildout, he said.

In the interview, Hesse said that the company would be launching a dual-mode 3G/4G MiFi device, which could use Clearwire's mobile WiMAX network to create WiFi clouds. He also confirmed that Sprint would be launching dual-mode 3G/4G smartphones next year, but declined to give details.

"So when you ask carriers questions about 4G, [it's not just] in terms of having the network up and working, but it's having the devices," he said. "Both of them are very important to 4G adoption. And I am really excited about dual-mode phones for next year."

Sprint's stock remained relatively stable on the earnings news, trading at around $3.20 per share in late morning trading.

For more:
- see these quarterly metrics
- see FierceWireless' Q3 earnings page
- see this release

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