Sprint Losing Smartphone Subscribers as Financial Losses Mount
Sprint lost 189,000 postpaid phone customers in Q1, compared with adds of 55,000 a year ago, as it moved off promotional pricing. The negative numbers were expected (see 1905060038). “We delivered on our guidance for fiscal 2018, but many of the underlying financial challenges remain,” CEO Michel Combes said on a Tuesday investor call. “As a stand-alone company, we lack the scale to keep pace with the bigger carriers, AT&T and Verizon, in sustained capital investment.” Without low-band spectrum, Sprint won’t be able to offer the same 5G service as its bigger competitors, he said.
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“We are making the best of the limited financial and broadband spectrum resources that we have,” Combes said. “We’re hopeful to complete our merger with T-Mobile, which will allow the combined company to have the breadth and depth of spectrum to provide a truly consistent nationwide 5G experience.” More than a year ago, T-Mobile agreed to buy the smaller carrier. Sprint officials said repeatedly the company won't be a competitive force without the deal, especially with no low-band spectrum for 5G (see 1903120079).
Postpaid churn was 1.82 percent, compared with 1.68 percent in the year-ago period, with the increase “mostly driven by customers rolling off promotional offers,” Sprint said. More positively, the company added a net 385,000 data devices. T-Mobile’s postpaid phone churn in the quarter was 0.88 percent. Revenue was $8.4 billion, up $142 million from last year. Service revenue fell $213 million. Sprint reported a net loss of $2.2 billion and operating loss of $1.7 billion. In the same quarter last year, the company made $69 million.
The company said it's building out its network as regulators consider its deal with T-Mobile. The takeover prospect has 2.5 GHz spectrum deployed on some 80 percent of its macro sites, up from less than 50 percent a year ago, and 30,000 outdoor small cells in place, compared to 5,000 last year.
"We believe that the investments we are making in our network ... may improve churn and help to lessen the perception gap that impacts gross adds today, but it takes time," Combes said.
Combes was asked about reports Sprint customers are getting service for free to boost numbers. Combes said it has cut the number of free lines by 30 percent. Free lines reference “a way we market to customers, but doesn’t necessarily mean these customers are paying zero dollars for our service,” he said. Combes cited as an example customers who have to sign up for unlimited service to get free lines as part of a package. As customers with discounted plans decrease, fewer will be exiting those plans in coming quarters, which should help churn, he said.
The wireless market is highly competitive, Combes said. “We have seen all of the players, regardless of their size and current position, making really aggressive offers to go after new customers and maintain their existing customer base." AT&T “was particularly aggressive last quarter and continuing to be so into this quarter,” he said. Sprint faces increased competition from cable operators, Combes said.
Bank of America’s David Barden told investors earlier Tuesday that Sprint’s challenge is to reconcile its story for Wall Street with the one it’s telling federal regulators. “In filings made to the FCC, Sprint is clearly trying to invoke the ‘failing firm’ defense,” Barden said.
T-Mobile and Sprint said Tuesday they selected Henrietta, New York, as the location for their previously announced Greater Rochester customer experience center, post-deal. It would employ more than 1,000, they said. T-Mobile CEO John Legere said last month he expects the FCC and DOJ to approve the transaction by the end of June (see 1904250065).