iPhone Sales, New Customers Help, but Sprint Still Posts Loss

Sprint sold 1.5 million iPhones during the second quarter and 40 percent of them to new customers, which was well above the percentage AT&T and Verizon managed. Though it posted a quarterly loss, Sprint raised its income forecast for the year.

Sprint posted an operating loss of $629 million during its fiscal second quarter, largely related to expenses incurred in the closure of its Nextel network. But the carrier also had plenty of good news to report. For one, its bet on the Apple iPhone is paying off.

Sprint sold nearly 1.5 million iPhones during the quarter. Verizon Wireless, the nation's largest carrier, sold 2.7 million iPhones during its second quarter, announced July 19, and AT&T, during its July 24 earnings call, shared that it sold 3.6 million of the Apple devices. The coup for Sprint, however, was that 40 percent of those iPhones went to customers brand-new to the network, versus 22 percent in the case of AT&T.

Additionally, AT&T's 3.6 million iPhones were down from 4.3 million the quarter before, just as Verizon's 2.7 million were down from 3.2 million during the first quarter. Sprint, however, stayed consistent at 1.5 million units, though 44 percent of its first-quarter iPhones went to new subscribers.

"Early-life churn€”and again, it's early€”is better than on other smartphones, calls to care are significantly lower than on other devices, service and repair and returns are all lower than on other devices," Sprint CEO Dan Hesse said during the earnings call, listing the benefits of the iPhone. "All the important early metrics tell us we made the right decision."

During the second quarter, Sprint also enjoyed its best-ever platform postpaid churn, at 1.69 percent, and reported that its service revenue increased by more than 8 percent during the quarter to $7.3 billion, primarily driven by a growth of $4.31 in its average revenue per user (ARPU). This was, Sprint said in a statement, "the largest quarterly year-over-year increase on record for the U.S. wireless industry."

More good news: Its adjusted OIBDA (operating income before depreciation and amortization), an income metric, was its highest in more than five years, and it expects more good news ahead, in terms of sales.

Sprint is expecting an increase in activity at the back end of the year, said a Sprint executive, carefully prefacing his remarks by saying that Sprint "does not know when or if a new iPhone is coming," and that the uptick is due to normal seasonal increases and many users becoming eligible for upgrades.

Though a new iPhone certainly wouldn't hurt.

Neither would new growth in Sprint's Long-Term Evolution (LTE) network, which is now in "five major markets and 15 cities" and is on-track for a nearly full rollout by the end of 2013. Before Labor Day, Sprint plans to bring LTE to Baltimore; Gainesville, Ga.; Manhattan/Junction City, Kansas; and Sherman-Denison, Texas.

Sprint also shared that its efforts to sign on Nextel customers as it closes that network are going swimmingly€”60 percent of postpaid subscribers leaving Nextel have been "recaptured" by Sprint. Its customer satisfaction rating, as determined by a third party, is the best of all national carriers€”a major turnaround from four years ago, when it rated last.

Even its $629 million loss was an improvement over the first quarter's $863 million loss.

With success in its ability to generate cash, build customer experience and build the Sprint brand€”three areas that Hesse said are his primary focus€”as well as finally an iPhone and a budding LTE network€”two areas in which it has played catch-up to Verizon and AT&T€”things are certainly looking up since those darker days four years ago.

"The Sprint platform achieved [its] best-ever postpaid customer churn that, combined with disciplined customer acquisition and cost management, contributed to our adjusted OIBDA of $1.45 billion," Hesse said in a July 26 statement. "Based on this performance, we are raising the 2012 adjusted OIBDA forecast to between $4.5 billion and $4.6 billion."