Sprint Nextel reported a wider loss in the second quarter as consumers abandoned the carrier in favor of competitors who carry Apple’s iPhone.
Sprint reported a net loss of $847 million, or 28 cents a share, for its fiscal second quarter ended June 30, compared with a loss of $760 million, or 25 cents a share, over the same period last year. Wall Street analysts had forecast a narrower loss, of 12 cents a share.
As the third-largest wireless company in the United States, Sprint has struggled against Verizon Wireless and AT&T. Sprint Nextel lost 101,000 contract customers during the second quarter, most likely because they moved to rival carriers to get the iPhone.
The availability of the iPhone at Verizon and AT&T hurt Sprint, as did the aggressive pricing for older iPhone models at AT&T, Joseph Euteneuer, Sprint’s CFO, said on the earnings call with analysts.
Even though it wasn’t profitable, it added 1.1 million net new customers during the second quarter, with 573,000 retail customers and 519,000 customers from its wholesale partners. Even with the iPhone defectors, the contract customer turnover rate was only 1.75 percent, which was Sprint’s best-ever result.
Sprint saw revenues grow 3.6 percent to $8.31 billion and average user revenue rose to $57 from $55 a year ago. Analysts had forecast revenues of $8.3 billion.
If AT&T’s proposed merger with Deutsche Telekom’s T-Mobile USA is approved by regulators, Sprint will be the weakest nationwide wireless provider. Sprint has repeatedly expressed its objections to the deal since it was announced in March and reiterated them again on the analyst call.
“Sprint has been the most visible leader of those that oppose the proposed takeover, but opposition is beginning to come from all corners,” Dan Hesse, Sprint’s CEO, told analysts on the call.
Sprint plans to spend $5 billion to upgrade its network over the next three to five years to compete with Verizon and AT&T’s various 4G offerings. Hesse also announced it had signed a 15-year spectrum hosting and networking services agreement with startup LightSquared.
Under the deal, Sprint and LightSquared would share network expansion costs and equipment while building out an alternative high-speed nationwide wireless network. The deal would help LightSquared build out its national network for less while giving Sprint a new revenue stream.
“In addition to improving our cash flow, it provides additional options and flexibility in how we meet our customers’ future capacity needs,” said Steve Elfman, president of network operations and wholesale for Sprint.
During an 11-year period, LightSquared will pay Sprint $9 billion in cash and $4.5 billion worth of credits. LightSquared will offer its wireless capacity wholesale to other companies. Sprint will be able to use the credits to acquire wireless capacity from LightSquared.
The Federal Aviation Administration released a report July 27 that found LightSquare’s proposed Long-Term Evolution 4G network could interfere with GPS signals that enable safe military, commercial and civil flight navigation, especially around airports. As a result, it was “almost inconceivable” that the Federal Communication Commission would approve the LightSquared plan at this point where lives were at stake, said Craig Moffett, an analyst at Sanford C. Bernstein.
“We will not turn on the network until this issue is resolved,” Hesse said on the call. The deal is contingent upon LightSquared resolving GPS interference issues, Euteneuer said, and Sprint can terminate the deal if conditions are not met by the end of 2011.