Sprint turns the corner, adds 1.1M net subscribers

Sprint Nextel (NYSE:S) continued its turnaround, adding 1.1 million total net subscribers in the fourth quarter, including net postpaid additions of 58,000 subscribers--the carrier's first net postpaid additions since the second quarter of 2007. The nation's No. 3 carrier, which has been slowly turning its operations around under CEO Dan Hesse since he took the helm in late 2007, achieved its best total wireless subscriber additions and net postpaid additions since the first and second quarters of 2006, respectively.

Click here for key slides from Sprint's fourth quarterOn the company's earnings conference call, Hesse said that Sprint's three main prioritiess--bettering the customer experience, building the Sprint brand and improving cash flow--are interlinked and have been mutually reinforcing each other. He added that while Sprint still has a long way to go before it reaches its full potential, he is pleased with the progress the company made in 2010.

In a separate interview with FierceWireless, Hesse said that 12 consecutive quarters of improved customers satisfaction, along with a strong focus on reducing churn, contributed to Sprint getting over the hump on postpaid net additions. He pointed out that Sprint's 2.7 million total net subscriber addition improvement from 2009 to 2010 was the biggest single-year turnaround for any U.S. wireless carrier.

Sprint expects to achieve positive postpaid net subscriber additions for 2011, which Hesse said will be primarily due to reducing churn.

As for Verizon Wireless' (NYSE:VZ) launch of Apple's (NASDAQ:AAPL) iPhone 4, Hesse said Sprint will continue to focus on improving the customer experience and expanding its handset lineup. He declined to discuss whether Sprint would eventually sell the CDMA iPhone. 

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

Subscribers: Sprint added 704,000 net retail subscribers and 393,000 wholesale subscribers. The company's postpaid net additions were its first since the second quarter of 2007, a major reversal from net postpaid losses of 504,000 customers in the year-ago quarter. Sprint said its CDMA network added around 453,000 total subscribers and its iDEN network lost 395,000 customers. Sprint added 646,000 net prepaid subscribers in the quarter. Sprint served 49.9 million customers at the end of the fourth quarter, including 33.1 million postpaid subscribers, 12.3 million prepaid subscribers and approximately 4.5 million wholesale and affiliate subscribers on Sprint's CDMA network.

Network modernization: Sprint also provided a few more details on its network modernization project, called Network Vision. The carrier selected Alcatel-Lucent (NASDAQ:ALU), Ericsson (NASDAQ:ERIC) and Samsung for its network modernization project, which will cost $4 billion to $5 billion, and is expected to take three to five years to complete and includes the deployment of new multi-mode base stations. Hesse said Sprint will begin offering next-generation push-to-talk services on its CDMA network this year as it migrates more iDEN customers to CDMA. The company plans to phase out iDEN cell sites in 2013. Hesse said laboratory testing for the new base stations will be conducted in the first quarter and that Sprint expects field integration to take place in the second quarter. He also added that Sprint will deploy the new technology in its eight largest metro areas in "the August time frame." Hesse said that if Clearwire (NASDAQ:CLWR) uses Sprint's modernized network, which allows it to deploy LTE, it could result in significant cost savings for both companies. 

Smartphones: Hesse said in the fourth quarter that smartphones accounted for 69 percent of all handsets sold or upgrades made in Sprint's CDMA customer base. He said 50 percent of the carrier's CDMA customer base use smartphones. Sprint recently raised the price of its unlimited smartphone data service by $10 per month. The carrier's new "Premium Data" charge applies to all new postpaid smartphone plans beginning Jan. 30. Hesse said the cost of service for smartphone customers is rapidly increasing relative to non-smartphone customers, but said Sprint decided to address the issue by increasing the price of its unlimited service rather than imposing metered pricing.

Clearwire/4G: Sprint is still holding what Hesse described as "very good discussion and negotiations" with Clearwire with respect to funding and strategy. Sprint holds a 54 percent stake in Clearwire, which is searching for either a new equity partner or a buyer for its excess spectrum in order to fund its operations. Clearwire also is reportedly abandoning its retail strategy. Hesse said the companies have not yet made any funding decisions. "If they need more, that will be a bridge they cross at that time," he said.

In the interview, Hesse said Sprint's primary relationship with Clearwire is that of a wholesale customer and that the focus of the talks has been on ways to improve that wholesale relationship.

Nonetheless, he said that, because of Sprint's majority stake in Clearwire, Sprint does care about Clearwire's strategic decisions. "We were pleased that they were able to go raise additional funds," he said, referring to Clearwire's $1.33 billion debt offering placed in December (Sprint declined to purchase more Clearwire debt). "We have not been against Clearwire looking at other ways of securing additional financing. Some of those are more attractive to us than others. I don't think it's secret that we don't want to see them sell their most valuable resource, which is spectrum, unless they need to."

Interestingly, Hesse also said Sprint is still exploring deploying LTE, and weighing the benefits of using it vs. WiMAX. He said Sprint has the necessary spectrum of its own to deploy LTE should it decide to do so. Hesse said Sprint may announce a decision on any potential 4G strategy change by the middle of the year or earlier.

Revenue: The company's total revenue clocked in at $8.3 billion, up 6 percent from the fourth quarter of 2009. Sprint said year-over-year improvement was primarily due to higher equipment revenues and prepaid Boost service revenues, partially offset by lower postpaid wireless service revenues and wireline revenues. Sprint said retail wireless service revenues came in at $6.5 billion for the quarter, up by almost 4 percent compared with the fourth quarter of 2009. In the fourth quarter of 2010, Sprint reported a net loss of $929 million, down from a net loss of $980 million in the fourth quarter of 2009.

ARPU: Sprint's wireless postpaid average revenue per user remained flat on a quarter-over-quarter and year-over-year basis at $55. Prepaid ARPU for the quarter was around $28, down from $31 in the year-ago period and flat from the third quarter of 2010. Sprint said the quarterly year-over-year decline was due to the increased number of Assurance Wireless customers and the inclusion of Virgin Mobile customers, who have lower ARPU than Boost Mobile customers.

Churn: Sprint's postpaid churn for the quarter was 1.86 percent, compared with 2.11 percent for the year-ago period and 1.93 percent for the third quarter of 2010. Sprint said quarterly year-over-year improvement in postpaid churn was primarily due to progress in "brand health," handset offerings and overall customer perception. Prepaid churn was 4.93 percent, compared with 5.56 percent for the year-ago period and 5.32 percent for the third quarter of 2010.

For more:
- see this FierceMobileContent article
- see this release
- see this FierceWireless Q4 earnings page

Related Articles:
Sprint selects network project vendors, will start shutting down iDEN in 2013
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Sprint increases unlimited smartphone data by $10 per month
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