Sprint (NYSE: S) improved its subscriber growth trends in the fourth quarter, even though it posted a net loss of postpaid customers in the quarter. Sprint CEO Marcelo Claure said the company is going to slash its churn, focus on improving its LTE network and continue to go after high-quality customers.
Two of Sprint's main challenges remain boosting its network coverage and performance and growing subscribers in the face of intense competition from T-Mobile US (NYSE:TMUS) and AT&T Mobility (NYSE: T) and others.
Claure said his focus will be on gaining market share and making Sprint more competitive and differentiated in the market. Claure, who took the helm from Dan Hesse in August, emphasized the progress Sprint has made so far in his tenure but noted that the company has a long way to go. Indeed, Sprint's postpaid and prepaid churn rates increased in the fourth quarter on both a sequential and year-over-year basis, though Claure vowed that Sprint will bring churn down in 2015.
Claure said Sprint is focused on providing the best value in wireless and that its promotion to cut the rate plan in half of Verizon Wireless (NYSE: VZ) and AT&T customers who switch has been very successful. That promotion has been extended through all of 2015. When customers come into Sprint stores they often choose Sprint plans that offer even more value than having their old plans cut in half, he said. As a result, Sprint increased its share of higher-quality customers in the fourth quarter, something which Claure said Sprint will continue to be focused on.
Sprint said that in its most recent quarter, its postpaid phone gross additions grew 20 percent year-over-year and the number of its new consumer account gross additions with three or more lines more than doubled from the year-ago period. Sprint added that its postpaid gross additions in the period included the highest percentage of prime credit customers ever.
While Claure declined to comment on rumors that Sprint will purchase 1,300 to 2,000 stores from RadioShack, he said Sprint is looking at multiple options and plans to increase its retail store count by at least 500 this year to catch up to its rivals.
Here is a breakdown of Sprint's key quarterly metrics:
Subscribers: Sprint said it added 967,000 customers to its LTE and CDMA networks (dubbed "Sprint platform" by the carrier), compared to 590,000 in the third quarter and 682,000 in the year-ago period.
Sprint platform postpaid net additions came in at 30,000, up from a loss of 272,000 in the third quarter but down from 58,000 a year ago. Critically, the carrier said it had postpaid phone losses of 205,000, compared to postpaid phone subscriber losses of 500,000 in the third quarter and 407,000 a year ago, as higher prime credit quality gross additions were partially offset by higher churn.
The company reported Sprint platform prepaid net additions of 410,000, up 88,000 year-over-year due to growth in the Boost brand. Sprint said it had wholesale net additions of 527,000, up from 302,000 a year ago.
However, due to subscriber losses related to transactions, Sprint posted a net loss of 19,000 postpaid customers, and a net gain of 371,000 prepaid customers and 540,000 wholesale customers, for a total net gain of 842,000 wireless customers. Sprint had 55.9 million total connections at the end of the quarter.
Smartphones: Sprint said its device financing options, including leasing, accounted for 46 percent of postpaid sales in the fourth quarter, compared to 27 percent in the third quarter and 7 percent in the year-ago period. That rate increased to 50 percent in December, according to Sprint CFO Joe Euteneuer, a rate Sprint expects to maintain in the near term.
Smartphones represented 97 percent of Sprint's postpaid phone sales in the fourth quarter and 87 percent of Sprint's postpaid phone base has a smartphone. Claure said that Sprint had a record 11.5 percent of its postpaid base upgrade in the fourth quarter, compared to 9 percent in the year-ago period.
ARPU: Sprint platform postpaid ARPU was $58.90, down from $60.58 in the third quarter and $64.11 in the year-ago period. Euteneuer noted that Sprint's average billings per user, which includes monthly device installment or leasing fees, clocked in at $62.16 in the fourth quarter, down less than 1 percent from $62.75 in the third quarter and down 3 percent year-over-year, primarily driven by higher tablet sales.
Financials: Sprint reported a net loss of $2.38 billion, compared with a year-earlier loss of $1.04 billion. The company booked a $2.1 billion non-cash impairment charge, which included a $1.9 billion write-down of the Sprint trademark name and $200 million to reduce the carrying value of wireline network assets. Total revenue dipped 2 percent to $8.97 billion.
Churn: Sprint's total retail postpaid churn was 2.33 percent, up from 2.22 percent in the third quarter and 2.15 percent in the year-ago period. Claure said Sprint plans to cut churn "by fundamentally transforming the customer experience" and including new real-time and proactive offers to retain customers, especially to get 3G and non-Spark customers to upgrade to new phones. Claure said Sprint expects churn in the first quarter to drop down to a level of what it was in the first quarter of 2014, when Sprint posted retail postpaid churn of 2.18 percent.
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