Sprint CFO: Installment pricing, promotions helped juice Q4 tablet numbers

Sprint's (NYSE:S) subscriber numbers were bolstered by a surge in tablet activations, which Sprint CFO Joe Euteneuer attributed to a variety of factors, including Sprint's introduction of installment pricing for tablets last fall and its holiday promotions.

In an interview with FierceWireless, Euteneuer noted that Sprint first got Apple's (NASDAQ:AAPL) iPad in late 2012 but that up until the fourth quarter of 2013 "our tablet sales were a yawner." Indeed, Sprint had never broken out tablet activations in its quarterly results until now.

"When we got into the fourth quarter and introduced installment billing, our tablet sales changed," Euteneuer said. "It ended [up] being a great quarter."

Sprint introduced installment billing for tablets last fall, letting customers pay off tablets via monthly payments. Such payment plans take the sting off a $600 tablet. Sprint initially offered installment payments through its "One Up" program, but recently replaced that program with a similar plan called "Easy Pay."

The installment plans "just really resonated with customers," Euteneuer said. 

The Sprint CFO could not point to a specific promotion that helped increase tablet activations, but Sprint had several, including one that let Sprint smartphone customers add a 3G/4G tablet to their account with a specially discounted rate plan that includes 1 GB of 3G/4G on-network data for only $15 per month.

Sprint's tablet activations helped it stay afloat in the fourth quarter in terms of subscriber additions. The company added 58,000 postpaid subscribers, 322,000 prepaid subscribers and 302,000 wholesale and affiliate subscribers in the fourth quarter to its Sprint platform. However, Sprint platform activations included 466,000 tablets, indicating weakness in the company's phone subscriber business. Sprint CEO Dan Hesse said on the company's earnings conference call that the company "had strength in tablets and growth in smartphones, but a significant decline in feature phones."

Financial analysts said Sprint's subscriber trends in the fourth quarter were not encouraging. "After backing out tablets and connected devices, Sprint lost 496k postpaid Sprint Platform subs, with gross adds and churn worse than we expected," New Street Research analyst Jonathan Chaplin wrote in a research note. "Tablet adds of 466k were solid and should be a source of future growth: penetration is only 2.5% compared to AT&T and VZ at 8-12%. Unfortunately, tablets are no substitute for handsets; they likely come on at ARPU of ~$25, well below the ARPU of lost phone subs."

"While 4Q13 headlines were better than expected, underlying results revealed further deterioration in the handset base which is likely to continue into" in the first half of 2014, Jefferies analysts Mike McCormack, Scott Goldman and Tudor Mustata wrote in a research note.

During his conversation with FierceWireless, Euteneuer also discussed Sprint's network advertising plans. He said the carrier will launch a national advertising campaign for its Sprint Spark service likely sometime at the end of the third quarter. Additionally, Euteneuer alluded to new device launches at the end of the third quarter (presumably a new iPhone) that could be catalysts for the launch of a national network-focused marketing message.

Sprint during the fourth quarter unveiled Spark, an LTE service that can deliver 50-60 Mbps speeds across Sprint's 800 MHz, 1900 MHz and 2.5 GHz spectrum. The carrier offers Spark in 14 markets today, and plans to expand it to 100 million Americans by the end of this year and then 100 markets within the next three years.

As for Sprint's LTE buildout, Euteneuer acknowledged that Sprint slightly missed its 1900 MHz LTE buildout target for 2013. Sprint had hoped to reach 200 million POPs with its 1900 MHz LTE service by the end of 2013, but ended the year at 198 million POPs. Euteneuer blamed the delay on inclement winter weather across many parts of the country. 

Sprint aims to increase LTE coverage on its 1900 MHz spectrum to 250 million POPs by mid-year.

Sprint also expects to launch indoor and outdoor small cell deployments later this year. Euteneuer said he could not provide any more specifics on the deployment right now, but said Sprint will be focused on improving both network capacity and coverage via small cells.

For more:
- see this CNET article

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