Sprint loses 231K postpaid subs, launches 'America's Newest Network' campaign in 20 cities

In its most recent quarter, Sprint (NYSE: S) reported improving financials, but the company lost 231,000 postpaid customers and 364,000 prepaid customers. However, Sprint promised to reverse that trend in the second half of this year by posting positive net customer adds in the final six months of 2014. Further, the company said that it has embarked on a marketing campaign touting "America's Newest Network," now available in 20 cities, intended to highlight its more reliable and faster wireless network.

"The finish line is finally in sight," said John Saw, Sprint's Chief Network Officer, of the company's "rip and replace" network overhaul. Sprint has promised that its Network Vision network modernization plan--which involved the overhaul of its CDMA network and the launch of LTE--will be substantially complete by the middle of this year. "Our new network is only the beginning," Saw added, promising new services on the "best performing network in America."

Sprint didn't immediately respond to requests for details on its new "America's Newest Network" marketing campaign, including how much the company is spending on the effort. Sprint has previously said it would focus on its network in its marketing message as it completes its Network Vision upgrade.

"We'll clearly have the network become a larger and larger part of our message over time," Sprint CEO Dan Hesse said during the company's quarterly conference call.

Sprint also touted progress with its new Framily calling plan, introduced in January, which rewards customers who add additional lines of service with lower monthly pricing. Sprint said that it now counts close to 3 million customers on its Framily plans. Sprint also today introduced a new Spotify promotion for its Framily customers; click here for that story.

Interestingly, Sprint also continued to see significant interest in its Easy Pay device financing program: The company said 29 percent of postpaid device customers selected the payment installment option, up from 7 percent in the previous quarter.

Here are some key metrics from Sprint's quarter ended March 31:

Subscribers: Sprint blamed the loss of 231,000 postpaid customers on "service disruption associated with the company's ongoing network overhaul," and promised that it would begin adding customers in the second half of the year after it finishes its network modernization project. The loss was smaller than some analysts had expected.

In prepaid, Sprint lost 364,000 customers, which the carrier blamed on changes in the Lifeline program recertification process. Sprint sells Lifeline service under its Assurance Wireless brand. The net loss of prepaid customers comes as somewhat of a surprise, considering Sprint's Virgin Mobile and Boost Mobile brands often generate significant customer additions for Sprint. Indeed, Sprint added 568,000 prepaid customers in the same quarter a year ago.

Sprint said it added 212,000 wholesale and affiliate customers during its most recent quarter.

Sprint ended the quarter with a total of 54 million subscribers.

In comparison, AT&T Mobility (NYSE: T) posted 625,000 postpaid subscriber net additions in the quarter, while Verizon Wireless (NYSE: VZ) notched 539,000 retail postpaid net subscribers in the quarter.

In a note to investors, New Street Research analyst Jonathan Chaplin took a decidedly concerned view of Sprint's results: "Sprint faces two major problems in our view: 1) The Network Vision upgrade just doesn't seem to be delivering the improvements that were promised, and; 2) Sprint's pricing is unsustainably high relative to the rest of the industry. On the network issue, with Network Vision 90% complete, churn should be coming down. We understand that the real improvements only take place when markets are 70% complete; however, the number of markets that are 70% complete should be steadily increasing driving an improving trend – instead it is getting worse. When the project is complete in mid-year, Sprint will still trail the other national carriers by a wide margin on core sites and LTE spectrum deployed. It seems that Sprint may not have a truly competitive network until they deploy Spark, and this is still unproven. On the pricing issue, Sprint is priced at a premium to all three national carriers on unsubsidized plans of three lines or more and they are at parity with AT&T on one and two line plans – this simply isn't sustainable."

Others disagreed: "Sprint has been improving over the past few quarters," Jan Dawson, an analyst with Jackdaw Research, told Bloomberg. "They have been marketing the Framily plan and working hard to get churn lower."

LTE network: Sprint said it launched LTE in 41 new cities; the company said it now covers more than 225 million people with LTE and remains on track to cover 250 million by mid-year. As for Sprint Spark, the company said the tri-band LTE service is available in six new cities and is expected to cover 100 million people by year-end. Sprint Spark is now available in a total of 24 markets across the country.

Further, Sprint's Saw said that the company has finished lab testing on its 8 Transmitters 8 Receivers (8T8R) radios, and is currently field testing the technology. Sprint aims to use 8T8R radios to enhance its deployment of TD-LTE on its 2.5 GHz spectrum, improving network capacity. 8T8R makes use of beamforming, which is a more efficient method of sending signals in specific directions to improve data throughput and overall network reliability.

Saw said that Sprint expects to overlay its network with 8T8R radios by the middle of this year and cover 100 million POPs with 2.5 GHz 8T8R radios by end of this year.

Financials: Sprint's quarterly net loss was $151 million in the quarter, which the company said was a 77 percent improvement from the first quarter of 2013. Sprint's revenue increased to $8.88 billion, which Bloomberg pointed out was better than the $8.77 billion that analysts had estimated.

Sprint said its wireless adjusted EBITDA margin clocked in at 25.3 percent in the quarter, up from 19.2 percent in the same quarter a year ago.

ARPU: Sprint's postpaid average revenue per user dipped to $63.52 in the quarter, from $63.67 in the year-ago quarter--Sprint blamed the decline on the increased sale of lower-cost Framily plans and subscribers increasingly moving to its handset financing plans. However, Sprint's prepaid ARPU jumped to $26.45 in the quarter, up from $25.95 in the year-ago quarter. Sprint said the increase in prepaid ARPU was due to increased sales of more expensive data plans for smartphones.

Churn: Sprint's total retail postpaid rose to 2.18 percent, from 2.09 percent in the year ago quarter. In total retail prepaid churn, Sprint recorded 4.35 percent, up from the 3.26 percent in the year ago quarter.

"Churn should continue to come down as we complete the voice network build," Sprint's Hesse said during the company's quarterly conference call.

For more:
- see these two Sprint releases
- see this CNET article
- see this FierceTelecom article
- see this Bloomberg article

Special Report: Wireless in the first quarter of 2014

Related Articles:
With 2.5 GHz, Sprint won't have much wiggle room in FCC's new spectrum screen
Shift from WiMAX to TD-LTE gaining momentum, report says
Sprint CEO Hesse's compensation balloons from $11M in 2012 to $49M in 2013
Sprint adds 1.5M iPhones in Q1, still loses subs as Nextel shutdown looms

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