Sprint loss grows, but revenue beats estimatesVW Staff
On Thursday, Sprint Nextel Corporation (NYSE:S) reported a large loss for the second quarter but saw its service revenue exceed estimates.
The No.3 carrier’s loss was $1.4 billion ($0.46 per share) from $7.3 billion in sales as compared to its $847 million loss ($0.28 per share) from the previous year. Analysts had estimated a $0.41 cents per share loss.
Incurring a loss isn’t anything new for Sprint. According to the Associated Press, it was the nineteenth consecutive quarter for a loss as the company faces tough competition from AT&T (NYSE:T) and Verizon Wireless (NYSE:VZ).
But on a positive note, Sprint increased its 2012 forecast for adjusted operating earnings by 18 percent with the exclusion of interest expenses and writing down asset values.
Revenue for the quarter was $8.84 billion, a 6 percent increase from the previous year. Analysts had estimated $8.72 billion.
Here’s some additional highlights from the quarter.
Shutting down Nextel
It’s time for Sprint to cut its losses on Nextel and it plans to completely shut it down by the middle of 2013 after purchasing it in 2005. At the time, Nextel brought its walkie-talkie capacity to the table but its behind the curve as its not compatible for either smartphones or data services.
Subscribers have ditched the network but Sprint continues maintaining its costs.
On Thursday, according to Sprint CEO Dan Hesse, the company is moving faster than planned to shut down Nextel antennas and with this freed up space, it will provide quicker data services.
Hesse also said in the second quarter, Sprint put its marketing resources on exiting Nextel subscribers to switch to Sprint instead of going to rival Verizon. A statistic had been cited that 60 percent of those leaving Nextel switched to Sprint.
Aside from the Nextel conversions, Sprint did not really add new customers in the quarter to its contract-based plans, reported AP, which represented the worst number in years; this is not a good thing as these coveted plans are profitable.
Christopher King, a Stifel Nicolaus analyst, expressed concern and said he saw “troubling signs” from the poor subscriber additions when measuring it against AT&T and Verizon.
In addition, customers on these contract-based plans paid $63.38 per month on average, representing a record high and almost as much as what AT&T customers pay.
We all know about the complaints with the AT&T’s dropped calls.
Success with iPhones
In the second quarter, Sprint sold 1.5 million iPhones with 40% going to new postpaid subscribers; it tagged on 442,000 net total of postpaid subscribers.
The number of activations was the same as the first quarter while AT&T and Verizon incurred declines on a quarter to quarter basis this year. Perhaps the allure of the iPhone 4S has fallen.
Sprint remains as the only national wireless carrier that continues offering unlimited data service; Hesse attributed this as a reason why Sprint continued adding iPhone subscribers even with its sluggish data speeds.
Sprint’s shares are up 17.95 percent to $3.97.