Sprint to show signs of a subscriber turnaround in Q1

Sprint Nextel (NYSE: S) is expected to begin showing signs of a turnaround when it reports first-quarter earnings tomorrow, though analysts tempered their hopes with warnings of continued subscriber losses.

The nation's third largest wireless carrier has been working to retain customers with cheaper plans and new, flashy handsets. Indeed, Sprint recently launched a national advertising campaign featuring CEO Dan Hesse touting Sprint's new 30-day, money-back guarantee. However, most analysts estimate Sprint will report a total net subscriber loss of around 300,000 in the quarter. That number is expected to include 600,000 postpaid subscriber losses, offset by gains of around 300,000 prepaid customers, according to analysts surveyed by MarketWatch.

One key metric that analysts will be watching is whether Sprint posts net CDMA subscriber gains for the first time since the fourth quarter of 2007. The company appeared to be getting closer to that point in the fourth quarter of last year, when its Sprint-branded CDMA network gained more than 3,000 postpaid customers after a net transfer of 93,000 customers from its iDEN network.

The reversal "would be viewed by investors as a very encouraging sign as it would suggest that Sprint's efforts to stabilize its postpaid business were finally taking hold," Deutsche Bank analyst Brett Feldman wrote in a research note.

Sprint has relied heavily on prepaid growth to propel it while it continues to contend with postpaid losses. However, that might become more difficult as prepaid unlimited carriers such as Leap Wireless (NASDAQ: LEAP), MetroPCS (NASDAQ: PCS) and TracFone continue aggressive pricing strategies.

One analyst, Michael Rollins of Citi Investment Research, is bullish on Sprint, and raised his price on Sprint's stock to $6 per share. He estimates Sprint will lose only 100,000 net subscribers in the quarter, and said the carrier still has room to cut costs. "We believe Sprint has room to also pursue incremental labor force reductions sometime during FY10 (2010) by at least not replacing natural employee attrition when possible," he wrote in a research note.

For more:
- see this FierceWireless Q1 earnings page
- see this MarketWatch article
- see this Kansas City Star article
- see this Bloomberg article

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