Sprint Adds 173K Postpaid Customers, but Q1 Loss Widens to $320M

By Todd R. Weiss  |  Posted 2016-07-25 Print this article Print
Sprint, mobile carriers, smartphones, Q1 2016 revenue, losses, prepaid additions, postpaid additions

A decade of quarterly losses continues for Sprint as the company optimistically looks for bright spots in its earnings picture.

Sprint has reported net operating revenue of $8 billion for the first fiscal quarter of 2016, which equaled its total for the same quarter in 2015, while its net operating loss widened to $302 million from a $20 million loss one year ago.

The loss includes $113 million in non-recurring contract termination charges primarily related to the termination of a prior wholesale arrangement with Ntelos Holding Corp., according to Sprint, which announced its first-quarter figures on July 25. The report also included operating income of $361 million, which fell from $501 million one year ago.

Sprint lost 8 cents per share, compared to a 1-cent-per-share loss one year ago.

The number-three mobile carrier did have some positives in its earnings report, however, as it announced the addition of 173,000 Sprint-branded postpaid mobile phone customers for Q1, as well as a 1.39 percent churn rate for the quarter, which the company said is its lowest-ever churn rate.

The company's $302 million quarterly loss continues a streak of quarterly losses that has been going on for a decade at the company, but its leaders remain optimistic about its future.

"We had another quarter of solid progress in our turnaround with the highest first-quarter postpaid phone net additions in nine years, the lowest postpaid phone churn in company history, and finally being postpaid net port positive against all three national carriers after five years," Sprint CEO Marcelo Claure, said in a statement. "We also grew wireless net operating revenue year-over-year while aggressively reducing the cash operating expenses of the business and our network is performing better than ever."

Overall, the company reported 377,000 net mobile customer additions in the quarter, including postpaid net additions of 180,000, prepaid net losses of 331,000, and wholesale and affiliate net additions of 528,000, over its main Sprint nameplate and its other brands. The company's overall postpaid churn of 1.56 percent in the quarter was unchanged for 2015, while its prepaid churn rate of 5.55 percent was up from 5.08 percent one year ago.

Sprint also boasted of more than $550 million in year-over-year cost savings across the company and said that it "remains on track to achieve its goal of a sustainable reduction of $2 billion or more of run rate operating expenses exiting fiscal year 2016."

The company has also raised about $5.1 billion in cash through the temporary lease-back deals involving some of its cell tower equipment, according to earlier eWEEK reports.

Several analysts contacted by eWEEK said that Sprint's financial performance continues to be problematic.

"Sprint's earnings announcement attempts to create a pretty picture with ugly paints," said Charles King, principal analyst at Pund-IT. "The company achieved its notable growth in postpaid customers by offering deep discounts and subscriber perks, contributing to Q1 revenues dropping to $8.01 billion [compared to $8.03 billion a year ago] and a loss of $302 million, or 8 cents per share, considerably wider than its year-ago loss of $20 million, or 1 cent per share."

On the plus side, "Sprint barely beat analysts' expectations of a 9-cent-per-share loss, and the company's management says it has raised enough cash to fund business through the fiscal year, including repaying debt maturities," said King. "While there's some minor good news here, Sprint's Q1 earnings offer a portrait of a company that's still fundamentally in trouble. After the dust settles from the planned acquisition of ARM Holding by Softbank [which owns 80 percent of Sprint], I expect Softbank's efforts to sell Sprint will continue in earnest."

Chris Antlitz, a senior telecom analyst with Technology Business Research (TBR), said: "Sprint showed incremental improvement in its 1Q16 results, but the company's long-term prospects are becoming increasingly dim."

One reason for concern, he added, is that the company's capital expenditures were down 63 percent year-over-year. Antlitz called that reduction "incredible" and said it "portends future network problems."

Sprint is essentially shifting itself to a business model that will ensure its short-term survival, according to TBR. "Though TBR believes Sprint has adequate liquidity to pay its upcoming debt, the company is still in a bind from a competitive perspective because it will have little capital left to invest in its network, which continues to have chronic issues. Sprint is also limited in how much it can invest in new technologies like 5G and network-functions virtualization and software-defined networks, which severely impacts the company's ability to compete over the long term against its increasingly stronger competitors."

The company is essentially "mortgaging its future to survive the short term, which is just delaying the inevitable, which is that Sprint will either have to ultimately file Chapter 11 bankruptcy and reorganize into a stronger entity, or be acquired by another company," according to TBR.


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