Sprint, in Very Busy Q3, Sold 1.4 Million iPhones, LTE in 230 Markets

Sprint had a hectic but exciting Q3, closing its deals with Softbank and Clearwire, ripping out its Nextel network and building out LTE.

Sprint's 2013 third quarter might be described in a single word: messy. Messy, though, in a construction site kind of way—messy with potential and growth.

During the quarter, it completed its merger with Japanese carrier Softbank, as well as its acquisition of once-partner Clearwire. It's also in the process of ripping out the old Nextel network and replacing it with Long Term Evolution (LTE) technology that will run on three spectrum bands.

Sprint CEO Dan Hesse said he keeps likening the process to building "the last little pig's brick house." The effort has been "very complex" and "very hard work," he said. "But we're finally turning a corner on this massive project and seeing light at the end of the tunnel."

Sprint Chief Financial Officer Joe Euteneuer called it a "transitional quarter."

Sprint sold 5 million smartphones during the quarter, 1.4 million of which were iPhones—and 40 percent of those went to new customers. Hesse said the carrier was in a "constrained inventory position on the most popular colors and models" of the iPhone 5S, and that it has a waiting list.

Smartphones accounted for 92 percent of postpaid phone sales during the quarter.

(AT&T, by contrast, sold 6.7 million smartphones during its third quarter, and smartphones accounted for 89 percent of postpaid phone sales; a significant majority of those, however—AT&T didn't share an exact figure—went to current customers upgrading. Verizon Wireless, during its third quarter, activated more than 7.6 million smartphones, 3.9 million of which were iPhones.)

Sprint was an industry front-runner in offering 4G, but it chose the less popular flavor of WiMAX. It has since been busy deploying LTE alongside its original 4G network and now has its LTE network in 230 markets. By the end of the year, it announced, it expects its LTE network to cover 200 million people.

Sprint gained 84,000 prepaid subscribers during the quarter and 181,000 "wholesale and affiliate" subscribers, but lost 360,000 postpaid subscribers. On this front, executives were realistic but hopeful.

"We expect postpaid churn to remain elevated for the next few quarters," Hesse said, until the network build-out is nearer to completion.

Sprint, once its veritable brick house is complete—and, given that Sprint now has more spectrum than any other Tier 1 carrier, it will someday have a brick house, indeed—expects to attract and keep customers with its fast, robust LTE network, as well as plans it rolled out this quarter. These include Sprint Unlimited for Life Guarantee, which offers customers unlimited talk, text and data for the life of the line of service, and One Up, which lets customers upgrade their phone every 12 months.

"The notion of unlimited is much more than a rate plan. That's all I'll say on that for now—it's more than that. So this was an important thing for us to do," said Hesse, adding that the announcement went out the day after the Clearwire deal closed, with Sprint feeling absolutely confident that going forward it will have the network capacity to support unlimited data plans for years to come.

Sprint's financial side of the house was as messy a construction site as its network, and it included pre- and post-Softbank periods.

But Hesse told analysts, "Revenue growth continues to be a good story for us."

Sprint grew its wireless service revenue for the 13th consecutive quarter, to $7.3 billion, and had its best-ever postpaid service revenue, of $5.8 billion, and its best-ever postpaid average revenue per use of $64.28.

It had a combined (predecessor and successor periods) net income of $383 million, an operating loss of $398 million and earnings (before taxes and whatnot) of $1.34 billion, up 5 percent year over year.

"We expect our network investments will bring customers greater speeds and capacity and, when combined with our unique unlimited for life offers, will improve our competitive positioning," Hesse said in a statement, summing up the quarter.