Sprint reported a loss of 189,000 in postpaid phone customers during its fiscal 2018 fourth quarter compared with the year-ago quarter, which saw 55,000 net phone additions.
"Sprint delivered on its plan for fiscal 2018, as we met all of our financial guidance for the year," said Sprint CEO Michel Combes in a statement.
But he continued in much the same vein the company has been talking as it’s in the final stages of its proposed merger with T-Mobile: "While we've made progress, there are certainly continued challenges to address, which will continue to put pressure on our service revenue and retail customer growth," Combes said.
Postpaid churn was 1.81% compared with 1.85% in the prior quarter and 1.78% in the year-ago quarter.
Sprint’s net loss of $1.9 billion for the full year compared to net income of $7.4 billion in the prior year, as fiscal year 2018 included a preliminary noncash goodwill impairment charge of $2 billion, and fiscal year 2017 results included a $7.1 billion noncash benefit from tax reform.
Perhaps the upshot is this statement from Sprint’s earnings press release: “While the company continues to look for opportunities to improve operational and cost efficiencies in fiscal 2019, these improvements are expected to be fully offset by incremental costs associated with network and customer experience initiatives,” the company said.
Asked during Tuesday’s quarterly conference call to lend some context to recent regulatory-related headlines about the sustainability of Sprint absent the merger, Combes said Sprint’s recent filing was intended to give regulators additional insight into the challenges that Sprint faces and its ability to be an effective competitor without the transaction.
Most analysts are very familiar with the challenges that Sprint faces, he said, but that is not the case for everyone, and that’s why the company wanted to present the situation in the filing. “We just wanted to make sure the regulators clearly understood” the competitive environment and what 5G deployments would look like with and without the merger, he said.
While Sprint has made a lot of progress in improving its network and financials over the last few years, “we still lack low-band spectrum. We still lack scale, and we still lack financial resources” relative to AT&T and Verizon, Combes said. “That’s just what we wanted to update the regulators with.”
Combes also said the company remains optimistic that the government will see the compelling arguments in favor of the merger.
In a note to investors, analysts at MoffettNathanson said recent disclosures from Sprint have put a finer point on the argument that the merger with T-Mobile is Sprint’s only shot at long-term viability. To be fair, Sprint executives have been making the “failing firm” argument from the beginning, saying the network was deficient, but the most recent articulations of their predicament are the most urgent yet, they noted.
In summary: “Given the mounting odds against merger approval, one would expect growing attention to Sprint’s results,” the MoffettNathanson analysts wrote. “The reality of the picture at Sprint—the subscriber base is shrinking, ‘real’ EBITDA is flat to declining, and FCF (free cash flow) is barely positive—stands in stark contrast to the improvement in Sprint’s ‘as-reported’ metrics. Again, this is precisely what Sprint itself has called out in its own regulatory filings.”