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The HTC Evo 4G smartphone was in many ways a blessing for Sprint during its second quarter, proving to be a very popular device and mitigating the impact of Apple’s release of the iPhone 4 during the same period.
However, that popularity, along with market factors, has led to a shortage of HTC Evo 4Gs since soon after the device’s June 4 launch. It’s a situation that Sprint is working hard to correct, according to CEO Dan Hesse.
“[HTC CEO] Peter Chou has heard from me probably more often than he’d like to,” Hesse said, explaining that there’s currently a worldwide shortage of parts, particularly of chips and displays.
“What happened in the 2008-early 2009 timeframe is a lot of the capacity came offline, as the economy began to go down. And now, with a combination of the economy improving and all of a sudden some real increased customer demand for these high-end devices, it’s putting some strain on the supply chain. We are working with our suppliers very closely, HTC in particular, trying to get as much inventory as we can. … We could definitely sell more [Evo 4G handsets] if we could get more.”
Hesse’s comments came during a conference call July 28 with journalists and analysts to announce Sprint’s financial numbers from the second quarter. Overall, Sprint presented another glass-half-full quarter. The country’s third-largest carrier announced second-quarter revenues of about $8 billion and a net loss of $760 million-which was down from first-quarter losses of $865 million on revenues of $8.1 billion.
With thanks to the Evo 4G and RIM BlackBerry Curve, as well as its best-ever postpaid churn rate of 1.85 percent, Sprint saw a net postpaid subscriber growth of 136,000 on its CDMA network and 285,000 for “the Sprint brand.”
During the call, Hesse also acknowledged the launch of the Apple iPhone 4, which became one of the largest news items during the quarter.
“I would not be perfectly honest with you if I didn’t say that each time Apple announces a new phone, there’s an impact on the market-that we don’t all feel it,” he said. “But what we’ve done over the last few years is mitigate the size of that impact … by having our own plan. The Samsung Instinct helped us in ’08, the [Palm] Pre helped us in ’09, and the Evo will help us this year to mitigate that impact.”
Somewhat undoing Sprint’s plan, however, has been its shortage of the Evo 4G. With its iPhone-mitigating HTC handset, Sprint has also felt the thorns on the rose, as AT&T has in its efforts to support its iPhone users. Evo 4G customers, said Hesse, are using “three and a half times more data” than Sprint’s other smartphone customers. While the demands of AT&T’s highest data users encouraged it to move from its former all-you-can-eat service plans to tiered pricing, Hesse said Sprint isn’t there yet.
“Customers will pay a premium for simplicity,” he said. “Our bundled plans and our simple plans are helping us with churn, are helping our brand, so we won’t take the decision lightly to move away from our current structure to something around tiering. I’m not excluding it as a future possibility, but we see no need currently to move in that direction.”
He added that, with the Clearwire network-which supplies 4G service to the Evo 4G, and soon the Samsung Epic 4G, which will be its second 4G-enabled handset-Sprint is additionally at an advantage. “It’s less expensive, from a technical point of view, with our spectrum position at Clearwire … to produce gigabytes on 4G networks than 3G networks,” Hesse said.
During the quarter, Sprint, via Clearwire, launched eight new 4G markets, bringing its current total to 43 markets reaching 51 million people. Its goal for the end of 2010 is to cover 120 million people in marketing, including Boston, New York, San Francisco and Washington, D.C.
During the quarter, Sprint announced that it served 48.2 million customers-a tally of its 33.2 million postpaid subscribers, 11.2 million prepaid subscribers, and 3.7 million wholesale and affiliate subscribers.
On July 22, competitor AT&T announced second-quarter consolidated revenue of $30.8 billion, net income of $4 billion and a total customer base of 90.1 million subscribers. A day later, Verizon Wireless, the nation’s largest carrier, with 92.1 million subscribers, announced second-quarter revenue of $26.8 billion, though a loss of $198 million, due to what it described as a number of one-time issues.