Sprint, Despite Best-Ever iPhone Sales, Posts $1.3 Billion Loss
Sprint enjoyed its best-ever quarterly sales of the Apple iPhone during its fiscal 2012 fourth quarter, it announced Feb. 7. It sold 2.2 million iPhones during the quarter—38 percent of them to new customers—and 6.6 million during the full year 2012.
The figure put Sprint "well ahead of its contractual obligations with Apple," Sprint CEO Dan Hesse said during a morning earnings call. He added that compared with other device owners, Sprint's iPhone owners call customer service less often, return devices less often, exchange devices less often and are less likely to leave for a competing carrier.
"Performance data continues to support our decision to offer the iPhone," said Hesse, who has offered the refrain as often as is possible, since the carrier went deep into debt in order to afford to offer the iPhone. Like its rivals, Sprint subsidizes the pricey device, taking a hit so as to offer it to customers at a starting price of $199 with a two-year contract.
T-Mobile has promised to change the game, saying it will soon offer an iPhone unsubsidized and with a low monthly financing payment but also no contract.
"We have ... assumed that T-Mobile will be getting the iPhone in 2013," Hesse told analysts, when asked how Sprint plans to respond to a T-Mobile iPhone. "We have competitive plans around that. We take that seriously. T-Mobile is a competitor and the iPhone is a very competitive device. We have plans in place, but I am not going to disclose what they are."
The comment caused some nervous laughter from colleagues on Hesse's side of the call.
Sprint posted net operating revenue of $9 billion for the quarter, and $35.4 billion for the full-year 2012, but like larger rivals Verizon Wireless and AT&T, it finished the quarter in the red—with a net loss of $1.3 billion, in Sprint's case—suffering the effects of October's Hurricane Sandy.
Sprint's bottom line was additionally hurt by the process of shutting down the Nextel network, which has been a drag on the business since it was acquired in 2006. On the bright side, with every portion that Sprint closes, it has new spectrum to dedicate to its Long Term Evolution (LTE) 4G network efforts. It's also successfully "recapturing" customers leaving Nextel and bringing them to Sprint.
The fourth quarter generated Sprint's best-ever prepaid recapture rate, at 50 percent, while it also enjoyed a 51 percent postpaid recapture rate of Nextel customers.
The Nextel customers helped Sprint post its 11th consecutive quarter of growing its postpaid subscriber base, which increased by a 401,000 subscribers and brought Sprint's overall network load to a new high of 53.5 million subscribers.
Sprint's LTE network also grew during the quarter and is now in 58 cities, though executives acknowledged that Sprint' LTE network "lags behind" the far larger networks of Verizon and AT&T, and that its LTE and Nextel shutdown efforts have both fallen behind schedule.
Still, Sprint is on track to completely shut down the Nextel network by the end of the second quarter. That development—along with Sprint's vast improvements to customer service; its recent purchase of some U.S. Cellular spectrum and customers, which will improve its service in Chicago, in particular; its bid to buy out Clearwire; its still-pending deal with Softbank (which it wouldn't discuss during the call) and other pending investments—all put Sprint on a "pathway for growth," said Hesse.
He added, "We believe Sprint will emerge as a more competitive company."