Sprint's turnaround takes hold, adds 644K subs in Q3

It appears that Sprint Nextel's (NYSE:S) turnaround efforts are finally taking hold. The nation's No. 3 carrier added the most net wireless subscribers in a quarter since 2006, but still lost postpaid subscribers in the third quarter. Sprint also posted its first year-over-year revenue increase in years.

Click here for key slides from Sprint’s third quarter presentation.The results are promising for a company that has been mired in disarray. Sprint CEO Dan Hesse said during the company's earnings conference call today that Sprint continues to improve its customer care and network performance.

However, Sprint reported a wider net loss of $911 million, compared with a year-ago loss of $478 million.

Here is a breakdown of the company's key metrics:

Subscribers: Sprint added a total of 644,000 net wireless customers in the quarter, including net additions of around 364,000 retail subscribers and net additions of 280,000 wholesale and affiliate subscribers. Sprint's iDEN network lost more than 383,000 customers during the quarter. Sprint gained a net 471,000 prepaid subscribers, much stronger than the 173,000 prepaid net additions from the second quarter. Sprint continued to expand its various prepaid brands in the quarter, adding new states to its Assurance Wireless low-cost option as well as new offerings under the Virgin Mobile brand.

Sprint lost 107,000 postpaid subscribers in the quarter; however, this was an 87 percent year-over-year improvement and a 53 percent improvement from the second quarter. Sprint had 354,000 positive postpaid net adds on the Sprint brand. Hesse said Sprint is "net port positive" for both the Sprint brand and its CDMA network for the first time, meaning more customers are switching to Sprint than switching from Sprint. The company had 48.8 million subscribers at the end of the third quarter.

Revenue: Total revenue rose 1.4 percent to $8.15 billion, the first year-over-year revenue growth in three years. Sprint said retail wireless service revenues clocked in $6.4 billion for the quarter, up around 2 percent from the year-ago period and down by less than 1 percent from the second quarter.

ARPU: Wireless postpaid average revenue per user came in at $55 for the quarter, down year-over-year from $56 in the year-ago quarter but flat sequentially. Prepaid ARPU was around $28, down from $35 in the year-ago period and flat from the second quarter. Sprint said the year-over-year decline was due to the inclusion of Virgin Mobile and Assurance Wireless customers, who have lower ARPU than Boost Mobile customers.

Churn: Postpaid churn in the quarter was 1.93 percent, down from 2.17 percent in the year-ago period and up frmo 1.85 percent in the second quarter of 2010. The postpaid churn figure is Sprint's second best ever. Prepaid churn improved to 5.32 percent, down from 6.65 percent in the year-ago period and 5.61 percent in the second quarter. 

Clearwire: Hesse said during the company's earnings conference call that Sprint has been holding discussions with Clearwire (NASDAQ:CLWR) about Clearwire's finances. Sprint holds a 54 percent stake in Clearwire and is a wholesale customer of the mobile WiMAX operator. Hesse offered no assurance that there will be any transaction with Clearwire. When asked during the call if Sprint has 4G options beyond Clearwire, Hesse said Sprint did, but did not go into details. "We do have alternatives that we would consider," he said. "I certainly don't want to suggest that is our primary focus, but we always have alternatives."

Network modernization: Sprint may be building alternatives into its network via its network modernization project, a topic that came up during the company's conference call. Sprint plans to deploy a multi-mode base station, which could give Sprint the flexibility to deploy LTE if it chooses. Sprint hopes to select and announce its vendor partners for the project by the end of the year. Hesse also confirmed that through the plan Sprint can reallocate iDEN spectrum for CDMA services if it wants to. Hesse said the project likely will take three to four years to complete. Click here for a FierceWireless interview with Hesse on the topic.

For more:
- see this release
- see these slides from Sprint's presentation
- see this FierceWireless interview with Hesse
- see this AP article
- see this WSJ article (sub. req.)
- see this FierceWireless Q3 earnings page

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