Sprint loses subscribers again in 3Q
New York • Subscriber trends are turning south again for Sprint Nextel as it struggles to compete with Verizon Wireless, the juggernaut of the industry.
The country's No. 3 wireless carrier on Thursday said it lost overall subscribers for the first time in two and a half years in the third quarter, as customers gave up on the moribund Nextel network and the company failed to sign up enough of them on the Sprint network.
It's the first time Sprint Nextel Corp. is reporting quarterly results since agreeing to sell 70 percent of itself to Japanese cellphone company Softbank Corp. for $20.1 billion. The deal hasn't closed yet, but Sprint has already borrowed money from Softbank.
Sprint lost an overall 423,000 subscribers in the July to September period, as trends across its product lineup were weak.
Excluding recaptured Nextel customers, it lost contract-signing subscribers from the Sprint network for the first time in years. Customers on contract-based plans are the most lucrative, and keeping them has been a linchpin of CEO Dan Hesse's turnaround plan.
For non-contract plans, the Overland Park, Kan., company added just 19,000 customers, the smallest number in more than three years.
Sprint's report follows a blow-out performance by Verizon Wireless, the country's largest carrier, which added 1.8 million overall subscribers, and a more lackluster report from No. 2 AT&T Inc., which added 228,000. Both figures exclude devices connected through wholesale agreements.
"We've constantly been playing catch-up," Hesse said. With financial backing from Softbank, "we can do that much more effectively."
Sprint started selling the iPhone last fall, helping level the playing field versus the bigger companies AT&T has been selling the iPhone since 2007, Verizon since February 2011. Now, Sprint will get closer to parity by adding the iPad and iPad Mini to its lineup, Hesse said. However, the appeal of the tablet will be limited for most Sprint subscribers, since the company is well behind Verizon and AT&T when it comes to upgrading its network to "LTE" data speeds.
"We do have some what we call 'pardon our dust' issues," Hesse said, as the company decommissions the Nextel network and uses the space freed up on the airwaves to boost data download speeds.
Sprint bought the Nextel network in 2005, and it's been a major reason for Sprint's consistent quarterly losses for the last five years. Nextel phones are known for their push-to-talk capability, but the network doesn't support the kind of data rates that smartphones require, and it's not compatible with the Sprint network. Sprint is shutting it down next year.
All three carriers started selling the iPhone 5 in the quarter, but while the bigger two saw a jump in iPhone activations, Sprint did not. It activated 1.5 million iPhones in the quarter, flat with previous quarters.
Sprint's loss was $767 million, or 26 cents per share, for the July-September quarter, from a loss of $301 million, or 10 cents per share, a year ago.
Revenue rose 5 percent to $8.76 billion.
Analysts polled by FactSet expected a loss of 43 cents per share on $8.81 billion in revenue for the Overland Park, Kan., company.
Analyst Christopher King at Stifel Nicolaus said the financial results were better than he expected, but the subscriber trends raise concerns for over Sprint's long-term market share.