Sprint posts 347K net postpaid phone adds as ARPU, wireless service revenue fall

Marcelo Claure
Sprint CEO Marcelo Claure

Sprint saw 347,000 net postpaid phone additions in the latest quarter, up from 62,000 during the same period a year ago, and its net loss of $142 million was a marked improvement from the net loss of $585 million it posted last year.

But questions about the carrier’s long-term prospects continue to linger.

Much of the information in Sprint’s quarterly earnings report was released last week when the operator filed preliminary quarterly results with the SEC: Total net operating revenues came in at $8.25 billion, up 3 percent year over year, and wireless net operating revenues were up 5 percent to $7.85 billion. It posted a company-record churn of 1.37 percent, down 12 basis points from the previous quarter, and its overall customer count grew by 740,000.

“We took another step forward in our plan toward sustainable profitability and cash generation with this quarter’s results,” Sprint CEO Marcelo Claure said in a prepared statement. “The top line is now growing, we continue to take costs out of the business, and we are successfully raising money at materially lower rates to reduce our future cash interest expenses.”

Other key metrics from Sprint’s quarterly earnings report include:

Subscribers: Sprint’s offer to cut customers’ bills in half when they switch from other major carriers clearly continues to lure consumers. Its 173,000 net postpaid phone adds far outpaced analysts’ estimates released before Sprint’s preliminary results were released last week. But the carrier also saw a net loss of 427,000 prepaid users at a time when operators are increasingly vying for those users. Sprint plans to refocus on that market later this year when it relaunches its Virgin Mobile brand, although that relaunch has been pushed back to early next year.

“It’s very, very, very competitive in prepaid out there; I would even call it crazy competitive,” Claure said during a conference call with journalists, citing offerings that package handsets sold at a loss with prepaid service. “We’re trying to play less of that game and focus on profitability.”

Financials: Sprint’s financial results largely demonstrated ongoing – if unsurprising – improvement, but analysts noted that postpaid phone ARPU fell 6 percent year over year to $58.03, “slightly worsening form the 5.7 percent decline last quarter,” UBS analysts observed. “As a result,” UBS said, “wireless service revenues fell 6.3 percent to $6.02 billion, continuing to improve vs. the 6.9 percent decline in 2Q and 7.2 percent decline in 1Q."

Network: Sprint said its LTE Plus Network has expanded to 250 markets and the operator has begun to roll out three-channel carrier aggregation in markets including Chicago, San Francisco, Minneapolis, Dallas, Denver, Kansas City, Cleveland and Columbus in a move it said would enable peak download speeds of more than 200 Mbps on capable devices.

Summary: Shares of Sprint had climbed more than 90 percent since the beginning of the year, the Associated Press noted, and had risen 55 percent in the last 12 months, although they tumbled 6 percent by mid-morning Tuesday following the carrier’s earnings report. The carrier’s financial performance likely doesn’t merit a high valuation, MoffettNathanson analysts opined, but it does indicate Sprint is gradually regaining its footing.

“None of this is to suggest a calamity,” MoffettNathanson analysts wrote in a research note. “Far from it. It suggests merely stability and a rough continuation of the status quo.”