Sprint narrows subscriber gap in Q1, but loss widens

Sprint Nextel (NYSE: S) continued to lose wireless subscribers in the first quarter and reported a wider net loss, but the company made progress toward overall subscriber growth. The nation's No. 3 carrier noted that it had its best year-over-year postpaid subscriber results in five years.

"I never said Sprint's turnaround would be quick or would be easy," Sprint CEO Dan Hesse said, noting the company has been gathering momentum since he took the reins in late 2007.

Sprint's stock fell 2.2 percent to $4 per share in pre-market trading.

Here's a breakdown of some of Sprint's key metrics:

Subscribers: Sprint lost a total of 75,000 net wireless subscribers in the quarter, compared with a net subscriber loss of 182,00 in the year-ago quarter. Still, the carrier continued to bleed postpaid subscribers, losing 578,000 in the quarter. However, that was 670,00 fewer postpaid subscriber than it lost in the first quarter of 2009. The carrier's postpaid losses were offset by 348,000 net prepaid customer additions. Sprint also added 155,000 wholesale and affiliate subscribers as a result of renewed subscriber growth in its MVNO business. The company had a total subscriber base of 48.1 million at the end of the quarter.

In an interview with FierceWireless, Hesse said postpaid growth will slow, and that the drops in postpaid additions at AT&T Mobility (NYSE: T) and Verizon Wireless (NYSE: VZ) were due to both the improvements Sprint has made and the increasing popularity of prepaid. Nonetheless, Hesse said Sprint will continue to work to get back to postpaid growth, first on its CDMA network. "The iDEN piece has been the lion's share of the postpaid subscriber losses for some time," he said. "You have to take the two separately. There's no question it makes it harder."

Financials: Sprint's total revenue was $8.09 billion, down 1.5 percent from $8.2 billion in the year-ago period. Sprint's wireless service revenues clocked in at $6.4 billion for the quarter, up by less than 1 percent from the year-ago quarter and up around 3 percent compared with the fourth quarter of 2009. The company said the increases were due primarily to its acquisition of Virgin Mobile and the success of its Boost Mobile monthly unlimited plan.

      ARPU: Wireless postpaid average revenue per user was around $55 for the quarter, down year-over-year from $56, but flat sequentially. Prepaid ARPU came in at $27, compared with $31 in the year-ago period and in the fourth quarter of 2009. Sprint said the declines were due to the inclusion of Virgin Mobile and Assurance Wireless customers who have lower ARPU on average than those of Boost Mobile customers.

      Churn: Postpaid churn in the quarter was 2.15 percent, down from 2.25 percent in the year-ago period and up from 2.11 percent in the fourth quarter of 2009. Postpaid churn, excluding the effect of deactivations of Helio customers, was 2.12 percent, Sprint said. Prepaid churn was 5.74 percent, compared with 6.86 percent in the year-ago period and 5.56 percent in the fourth quarter of 2009.

      Clearwire/4G: During the company's call with analysts, Hesse talked up both the Overdrive 4G mobile hotspot and the company's forthcoming smartphone, the HTC Evo, which will run on Clearwire's (NASDAQ: CLWR) mobile WiMAX network. Hesse told FierceWireless that Sprint will launch more 3G/4G phones this year as well. He said the company is not currently disclosing how many 4G customers it is signing up. However, he noted that because of Sprint's majority stake in Clearwire and the nature of its contract, it has a "founder's preference discount" that gives it a wholesale pricing advantage over other carriers and MSOs, such as Comcast and Time Warner Cable, that are also Clearwire wholesale partners. Interestingly, Hesse described prepaid mobile WiMAX service as a "possibility," but said no decisions have been made.

      Hesse also said Sprint is considering tiered data pricing. "We'll announce any changes to pricing when we're ready to do that," he said. "But it's clearly something worth thinking about and analyzing."

      Prepaid: Sprint said in the next few weeks it will launch and implement its multi-brand prepaid strategy. Dan Schulman, the head of Sprint's prepaid business, said the integration of Virgin Mobile USA is proceeding better than expected, and that Sprint had cut one-third of the workforce of its combined Boost Mobile and Virgin Mobile operations. He said Sprint will re-launch the Virgin brand in May as well as another brand focused on pay-as-you-go subscribers. "We think the multi-brand strategy allows us to go after more of the prepaid market opportunity," Hesse told FierceWireless. "And as Dan indicated, rather than having one brand and one blunt instrument where you have to continue to focus on price, it allows you to create unique value propositions for different segments of the market."

      iDEN: Hesse said Sprint remains committed to its iDEN network, but that it is continually looking at technologies as the market evolves. "We will continually look at what's the best utilization of our spectrum assets and what are the best technologies available to provide the applications that our customers want," he said. "We're thinking long term in terms of an evolution plan." He emphasized that no decisions have been made, and also pointed to a number of recent iDEN device launches, including the Android-powered Motorola i1.

      For more:
      - see this FierceWireless Q1 earnings page
      - see this release

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