Sprint 'undeniably improving' with half a million new customers and improved financial guidance

No wonder Sprint (NYSE: S) was in such a hurry to release its fiscal third-quarter earnings.

The foundering carrier posted a solid quarter, reporting 501,000 postpaid net additions, up from just 30,000 year-over-year, and an adjusted EBITDA of $1.9 billion, far outpacing Wall Street estimates. It posted net operating revenue of $8.1 billion, however, falling just shy of analysts' expectations of $8.2 billion.

The company reported a net loss of $836 million, down from $2.38 billion a year earlier.

Sprint also raised its guidance for EBITDA in fiscal year 2015 from its previous expectation of $6.8 billion to $7.1 billion to a range of $7.7 billion to $8 billion. It set preliminary guidance for fiscal year 2016 adjusted EBITDA to an approximate range of $9.5 billion to $10 billion.

The company saw the highest number of postpaid ports in its history, indicating the aggressive 50 percent-off campaign it launched in mid-November was effective during the critical holiday season. Sprint's churn was 1.62 percent, down 68 basis points from the year-ago period and marking its best year-over-year improvement in 12 years.

Sprint said its net adds are on the upswing.

Sprint shares, which had slid dramatically during the past two weeks, were up more than 13 percent in pre-market trading on the news.

Sprint had initially planned to release quarterly earnings next week, but bumped up the announcement to help ease investors' concerns. The operator confirmed earlier this week that it was slashing 2,500 jobs in a third round of layoffs as part of a broader cost-cutting effort. Click here for that full story.

Sprint is also looking to trim its network expenses, and a recent Re/code report indicated the carrier would move aggressively to relocate its equipment from land leased from tower companies to government-owned locations. That report also said Sprint would transition to using microwave for backhaul rather than paying other operators to use their fiber-optic cables to link Sprint's wireless network to telecom infrastructures.

Sprint CEO Marcelo Claure said "the information wasn't correct" in that report, although he declined to discuss any inaccuracies directly. Sprint's recent share slide stemmed partially from skepticism over the carrier's ability to dramatically transition to new network technologies without experiencing any major hiccups.

"It caused a lot of damage and a lot of confusion," Claure said of the report during a post-earnings conference call. "What we're doing is we're densifying our network" by deploying small cells to complement its macrosites. Claure also denied the transition would cause any service disruptions, saying "This is not a rip-and-replace strategy."

Here are some key metrics from Sprint's quarterly report:

Subscribers: Sprint enjoyed 366,000 postpaid phone net additions during the quarter, a dramatic turnaround from the 205,000 net losses it reported in the prior year quarter. The figure was the highest net additions in three years for Sprint and marks a second consecutive quarter of positive postpaid phone gains.

Financials: Aggressive cost-cutting is already paying big dividends for Sprint, as the carrier said it has realized $800 million in savings to date, $500 million of which occurred during the latest quarter. It completed its first sale-leaseback transaction with Mobile Leasing Solutions, which provided $1.1 billion in cash in December. "The pace of cost reduction reveals a genuine sense of urgency at Sprint, something that had been sorely lacking with previous management teams," MoffettNathanson wrote in a research note.

Sprint said its cost-cutting efforts are paying off.

Handsets: Sprint's choice to target lucrative postpaid smartphone users took a toll on its prepaid business, however. The company reported prepaid net losses of 491,000 during the quarter, down from 410,000 net additions during the same period in 2014. "You've got to figure out where do you want to fight and where do you want to grow," Claure said. "We are keeping the customers that matter, but we're not going to fight for unprofitable customers." Sprint executives also said the company is de-emphasizing Virgin Mobile in favor of the Boost prepaid brand, but they didn't disclose detailed plans.

LTE: The company continued to tout its LTE Plus network, noting its recent deployment of two-channel carrier aggregation in the 2.5 GHz band. It stated again that LTE Plus has been expanded to more than 150 markets and is delivering speeds in excess of 100 Mbps on supporting devices. Additionally, it noted that 76 percent of postpaid phone sales during the quarter supported LTE Plus.

Churn: Sprint credited improvements to its network for helping to deliver the 1.62 percent churn, "the lowest ever for a third quarter."

Summary: Analysts agree that Sprint reported a solid quarter and has begun to reverse a severe slide. But the carrier still has an enormous amount of debt that must be refinanced, and its future is still uncertain in a market where two players dominate and a third -- T-Mobile -- continues to build momentum. "After all the puts and takes of accounting distortions, Sprint's results are clearly not as good as they first appear," wrote MoffettNathanson. "But they are still undeniably improving, and none of this diminishes Sprint's apparently genuine progress in reducing costs.

For more:
- see this WSJ article
- see this Re/code article
- see this Sprint press release

Related articles:
Sprint slashes 2,500 jobs as cost-cutting measures continue
Sprint touts LTE Plus network amid more than 800 layoffs and concerns over transition to small cells
Analysts: Sprint's reported network overhaul is high-risk, high-reward
Report: Sprint to cut $1B by moving towers to government-owned land, backhaul to microwave