Sprint Q1 Net Down as iDEN Subscribers Continue to Flee; WiMAX Coming to Prepaid
Sprint Nextel reported a Q1 net loss of $863 million, up from a loss of $439 million in the year-ago period. Despite subscriber growth on the Sprint network, which includes CDMA, WiMAX and LTE, the carrier lost 455,000 postpaid customers on a net basis on its Nextel network iDEN from Q4, leading to a total postpaid subscriber loss of 192,000. The carrier’s prepaid brands, Virgin Mobile and Boost Mobile, will gain access to WiMAX in Q2, executives said during an earnings call Wednesday.
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Sprint is keeping its older 4G standard alive and will bring it to its two prepaid units, said the carrier’s network chief, Steve Elfman. The company has started engineering its smartphones, enabling connection to WiMAX, he said. The carrier uses Clearwire’s WiMAX network. Sprint added 1.1 million customers in the quarter on a net basis, its sixth consecutive quarter with more than 1 million additions. It added 489,000 net prepaid customers in Q1 from Q4, including adding 870,000 prepaid customers on the Sprint network, offset by losing 381,000 prepaid Nextel customers. It served 56.1 million total customers as of March 31.
Sprint added 1.5 million iPhones in the quarter. More than 40 percent of iPhone customers were new customers, CEO Dan Hesse said. The number of service calls from new iPhone customers has been low and long-term iPhone customers will lead to lower churn, he said. “The evidence so far supports our decision to carry the phone.” Hesse said he doesn’t know when the next iPhone will arrive and whether it would be LTE enabled. Sprint is on track to roll out LTE services in six metropolitan areas by mid-year via its Network Vision plan: Atlanta, Baltimore, Houston, Dallas, Kansas City, Mo., and San Antonio, Texas, Hesse said. Beyond that, Sprint will add LTE markets as soon as it can. Some 3,000 Network Vision cell sites are under construction in 17 markets, Elfman said. Sprint expects to have around 12,000 cell sites with new multi-mode base stations online by year-end. Around 600 Network Vision sites are operational, doubling the coverage of legacy sites and helping reduce roaming costs, Elfman said. The carrier has also repurposed 2.5 MHz to 3 MHz of spectrum on its 800 MHz band from iDEN services to voice, he said. The goal is to take 9,600 iDEN sites off air by the end of Q3, he said.
The company is now in the second phase of its turnaround this year, which involves “investment for future growth” via the iPhone and its Network Vision network modernization plan, Hesse said. Bernstein analysts said a potential LTE iPhone would only highlight Sprint’s 4G network “deficiencies,” further impairing its “already-challenged subscriber growth rates.” Strong earnings trends in Q1 and higher earnings guidance for 2012 are critical to long-term investment strategy for Sprint, Credit Suisse analysts said. “We continue to believe patience will be rewarded over the long-term.”