[October 30, 2009] Sprint posts net loss of $478 million in third quarter Tweet Oct 30, 2009 (The Kansas City Star - McClatchy-Tribune Information Services via COMTEX) -- Sprint Nextel Corp. on Thursday promised improvement and ultimately success, though wireless customers continue to favor its larger rivals. In its third-quarter earnings report, the Overland Park-based carrier said it shed 545,000 wireless subscribers in the quarter while posting a net loss of $478 million, equal to 17 cents a share. That was 2 cents worse than analysts expected. But the more immediate concerns of Wall Street focused on the pluses and minuses of gaining new customers. Sprint said it signed up more calling plan customers than in the second quarter and that the improvement was the best in any quarter during the last five years. It also saw growth in the number of new prepaid customers -- a still-growing part of the industry -- who signed up in the quarter, though these customers generate less revenue. In both camps, however, Sprint continues to lose customers it already had more quickly than it would like. The loss rate, or customer churn, is what led to the net decline in total subscribers to 48.3 million at the end of September, compared with 48.8 million at the end of June. Rivals Verizon Communications Inc., with 89 million customers, and AT&T Inc., with 81.6 million customers, added wireless subscribers in the quarter. Chief Executive Dan Hesse called the third-quarter higher sign-up rate a positive sign that Sprint was "beginning to turn the corner" in adding calling-plan, or post-paid, subscribers. He also made clear that winning and keeping customers was the company's path to eventual profits. "We need to make even more progress on the subscriber front before we can improve earnings," he told analysts in a conference call after the earnings report. The third quarter -- July, August and September -- marked the first full quarter in which Sprint offered its popular Palm Pre smartphone. It continues to launch other handsets, including the Palm Pixi in about two weeks. "Certainly the introduction of the Palm Pre helped matters," said Christopher King, who follows Sprint for Stifel Nicolaus & Co. Inc. in Baltimore. "But the gross subscriber additions do come at a fairly significant cost." Sprint and other wireless service providers subsidize the cost that consumers pay for the new smartphones when customers sign up for a service contract of a couple of years or so. That subsidy, plus marketing and other costs to attract customers, takes some of the benefit out of adding customers. Hesse acknowledged the subsidy costs as a short-term pain but reaffirmed the longer benefits of these higher-revenue customers and their tendency to stick with a carrier once signed. Sprint's loss in the quarter reflected not only the pressure those costs put on its expenses but also a decline in total revenue. Revenues totaled $8 billion, down 9 percent from a year earlier. King said that equation contributed to an afternoon fall in share prices after the early morning conference call. Sprint shares lost 15 cents and closed at $3.09. The customer churn rate among calling plan subscribers was 2.17 percent in the quarter. Its prepaid customer churn rate was 6.65 percent. During the give-and-take with stock analysts, one suggested that Hesse consider a shift in strategy: Sprint might be better off focusing on keeping the customers it has rather than devoting resources to attracting new ones. Hesse would have none of it. "You can't win a game with just defense. You really have to have a defense and an offense," he said. "We're going to have a two-pronged attack." Although Sprint lost more customers during the third quarter than in the previous three months, its announcement said the trend would improve during the final three months of this year. "Sprint Nextel is in a fantastic position if you take a long-term view, given the fact that we're a pure play in a terrific industry," Hesse said. To reach Mark Davis, call 816-234-4372 or send e-mail to [email protected]. To see more of The Kansas City Star, or to subscribe to the newspaper, go to http://www.kansascity.com. Copyright (c) 2009, The Kansas City Star, Mo. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA. [ Back To TMCnet.com's Homepage ]