Sprint posts 173K postpaid phone net adds, $302M net loss

Sprint's (NYSE: S) aggressive promotions continued to pay dividends in the latest quarter as the carrier reported 173,000 postpaid phone net additions, beating analysts' estimates. But once again, those customer gains came at a cost.

The nation's fourth-largest carrier posted a company-record postpaid phone churn of 1.39 percent, marking the sixth consecutive quarter of improved churn year-over-year. And it was postpaid net port positive against its three bigger rivals, marking the first time in more than five years that it won more customers from each of the major operators than it lost to them.

Sprint posted a net loss of $302 million, though, significantly larger than its $20 million loss from a year ago, and its $6.1 billion in wireless service revenue fell just shy of the $6.2 billion expected by analysts at Wells Fargo Securities.

"We had another quarter of solid progress in our turnaround, with the highest first-quarter postpaid phone net additions in nine years, the lowest postpaid phone churn in company history, and finally being postpaid net port positive against all three national carriers after five years," CEO Marcelo Claure said. "We also grew wireless net operating revenue year-over-year while aggressively reducing the cash operating expenses of the business and our network is performing better than ever."

Investors agreed, sending shares of Sprint up more than 19 percent in Monday morning trading.

Here are some key metrics from Sprint's quarterly earnings report:

Subscribers: Aggressive marketing campaigns such as Sprint's offer to cut customers' bills in half when they switch from other major carriers continue to resonate with consumers. Its 173,000 net additions of postpaid phone customers – the most lucrative users in mobile – far outpaced the 100,000 Wells Fargo had estimated. The company continued to lose ground in prepaid, however, losing 331,000 of those users and posting a prepaid churn of 5.55 percent.

Financials: Sprint slashed its overhead costs by $550 million year-over-year thanks to its ongoing budget cuts, and it is on course to eliminate $2 billion or more of run-rate operating expenses by the end of its fiscal year. And the company said it has the combination of cash and liquidity to repay its fiscal 2016 debts as they come due.

Network: LTE Plus service is now available in 237 markets, Sprint said, and its 2.5 GHz spectrum now carries more LTE traffic than any of its other spectrum bands. The operator said it plans to deploy three-carrier aggregation as early as next year.

Summary: Sprint continues to win postpaid phone customers in a U.S. market where growth has slowed to a crawl, and it appears to have regained its financial footing for the short term, at least. But questions remain about its long-term prospects, and many analysts harbor doubts about whether the company can continue to improve its network without upping its capex significantly. "Unless something changes dramatically – have they found a magic elixir that will allow them to spend less on their network than any of their peers going forward, for example? – there is just no plausible case for Sprint equity at anything like these levels… regardless of whether Sprint is or is not doing 'better,'" MoffettNathanson analysts wrote.

For more:
- see Sprint's investor relations page

 Related articles:
Sprint 'undeniably improving' with half a million new customers and improved financial guidance
Sprint slashes 2,500 jobs as cost-cutting measures continue
Sprint touts LTE Plus network amid more than 800 layoffs and concerns over transition to small cells
Analysts: Sprint's reported network overhaul is high-risk, high-reward
Report: Sprint to cut $1B by moving towers to government-owned land, backhaul to microwave

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