Sprint Posts $1.6 Billion Loss, Neck Deep in 'Historic' Moment
Sprint continues to push forward through its things-have-to-get-worse-before-they-get-better period. The nation's third-largest carrier announced a second-quarter net loss of $1.6 billion, following the closure of its outdated Nextel network and the subsequent loss of more than 1 million subscribers.
Sprint said it has "recaptured" more than 4 million subscribers from the Nextel network since the launch its Network Vision strategy—which largely entails tearing down the old push-to-talk network and building a Long Term evolution (LTE) network in its place—in early 2011. It didn't say, however, what percentage of overall Nextel subscribers those 4 million represent.
"We're almost done. We've shut the network down. But we still have some issues that will impact the second half of the year and will continue to affect us," said CEO Dan Hesse. "Still, the savings will be almost immediate."
Sprint increased its LTE footprint during the quarter and now covers 151 cities. By the end of the year, it expects 200 million people to have access to the network.
Still, Hesse acknowledged, "We do find ourselves behind our competitors, in terms of LTE, and that has an impact."
Sprint is the only tier-one carrier to still offer unlimited data at full 4G speeds (where available)—a model that it has acknowledged isn't sustainable indefinitely. During the quarter, it introduced an unlimited data lifetime guarantee, suggesting that those who don't sign up now shouldn't expect that the offer will always be around.
When asked by an analyst during the carrier's July 30 earnings call whether unlimited data plans affect subscribers' data usage, Hesse said that, compared to the figures offered by competitors, there's not much of a difference in data use, though it does help with churn and in lowering support costs—the No. 1 reason people used to call customer support was overage fees.
"Where we see is a difference is, or, what drives usage, isn't the [plan a subscriber is on] but whether they're on LTE," said Hesse. "That drives usage much more ... and that's why rolling out Network Vision is critical for us."
Sprint sold 1.4 million Apple iPhones during the quarter—41 percent of them to new customers. Of the handsets Sprint sold to postpaid subscribers during the quarter, 86 percent were smartphones. Sprint also increased its average revenue per customer to $64.20, from $63.38 a year ago.
Hesse said Sprint is in a "historic" moment. In addition to closing the Nextel network, it has completed three important transactions: the purchase of spectrum from U.S. Cellular, the acquisition of Clearwire and its $21.6 billion deal with Japanese carrier Softbank.
"In the second quarter, we achieved record levels in Sprint platform postpaid subscribers, service revenue and postpaid ARPU, and increased our 4G LTE footprint," said Hesse. "Sprint pioneered unlimited voice, text and data in 2008, and we recently introduced the first lifetime guarantee, solidifying our commitment to the simplicity and peace of mind that unlimited brings."
Sprint's Network Vision plan also includes consolidating multiple technologies into one network—this includes supporting 800MHz, 1.9GHz and 2.5GHz spectrum bands on its new LTE network.
During the quarter, Sprint launched three tri-band LTE devices and said that by next year, all its devices will be compatible with Clearwire's 2.5GHz spectrum. (When asked whether this included the iPhone, however, Chief Financial Officer Joe Euteneuer back-pedaled, saying he can't comment on Apple's plans, now or ever.)
Looking ahead, Sprint increased its operating income forecast for the full year 2013 to between $5.5 billion and $5.7 billion, up from $5.2 billion to $5.5 billion.