Sprints Slows Churn, Posted $23M Profit in Q2

Sprint managed to post a profit during Q2 and slowed its subscriber losses. On its earnings call, it announced a new prepaid plan with Walmart.

Sprint earnings

Sprint, finally nearing the completion of a network overhaul it calls "one of the most complex network upgrades in history," saw second-quarter income of $23 million, compared with a loss of $151 million the quarter before and a loss of $1.7 billion a year ago, it announced July 30.

It also managed to reduce the number of customers leaving its network to 220,000, from 383,000 the quarter before and 520,000 a year ago. Plus, postpaid customer additions increased by 16 percent over the year-ago quarter, and Sprint sold 5 million smartphones. Sprint's smartphone sales represented 87 percent of its handset sales during the quarter—a record for the carrier, which has a strong prepaid market.

CEO Dan Hesse, on a morning earnings call, said adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) of $1.83 billion represented Sprint's largest year-over-year growth on record, and its 12th consecutive quarter of meeting or exceeding Wall Street estimates.

"We hit all our targets," said Hesse, adding that Sprint's LTE service now reaches 254 million people, it 3G network rip-and-replace efforts are now complete, and its HD Voice technology is now deployed nationwide.

Hesse also used the call to announce the launch of Virgin Mobile Custom, a "fully customizable" multiline plan that lets users "choose from texting, calling and data options to build plans that suit their needs."

Available only at Walmart, beginning Aug. 9, Virgin Mobile Custom will let users activate up to five lines for as little as $6.98 per line per month. It starts around a designated phone and comes with a Base plan with 20 texts and 20 minutes of voice calling; or, the plan can be upgraded to unlimited talking and texting for $35 a month. Alternately, just unlimited texting can be added for $10, or just unlimited voice for $18.

Initially, the plan will be offered on three devices: the ZTE Emblem, priced at $79.88; the LG Pulse, priced at $99.88; and the LG Unify, priced at $129.88.

The marketing around Custom tells customers to "stop over-paying" for wireless and "only pay for what you need."

"It's another service innovation to change the way Americans buy prepaid wireless," said Hesse.

Innovating around how Americans buy postpaid service may take a little more doing.

Sprint's Framily plan—group plans for families, friends or colleagues—boasted competitive pricing when it was introduced in January. "It's less competitive now," Hesse acknowledged.

"Trials are underway," he added. "We haven't made any decisions yet, but we may need to make some adjustments to our pricing levels, based on what we learn."

When asked whether Sprint, the only tier-one carrier to offer unlimited service (without throttling), may finally abandon the model, Hesse said, as he has in the past, that anything is possible, but it's unlikely to happen soon.

"Unlimited has strong appeal," Hesse explained. "I'm not making any declarations … but I would be very surprised if we did not continue to have unlimited offers in addition to metered offers. … Unlimited is something of very high value. If you look at our advertising, unlimited is becoming more prominent … because we find it continues to resonate with customers."

Rumors of a pending merger announcement between Sprint and T-Mobile continue to spread, growing richer in details by the week. (The latest: T-Mobile CEO John Legere in the CEO seat, a $32 billion price tag on T-Mobile, a break-up fee of $2 billion.) But the earnings call included no such details.

Speaking to the growth of Sprint's Spark network to now 27 markets and the successes of new fitness and music offerings during the quarter, Hesse said, "It gives us some optimism about the future."

T-Mobile will announce the results of its fiscal 2014 second quarter July 31.

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