Sprint performance continues to disappoint

Sprint continued to plod along after its much-ballyhooed acquisition of Nextel, announcing today lower Q3 profits and a dismal quarter of subscriber growth.

Sprint added 233,000 net subscribers in the three months ending Sept. 30, a far cry from the 1 million plus net additions its competitors Cingular Wireless and Verizon Wireless have routinely added for the last several quarters. Also, all of Sprint’s net adds came from its pre-paid Boost Mobile subsidiary and wholesale customers from its MVNO partners. Its core CDMA and iDEN postpaid business lost 188,000 net subscribers in the third quarter.

Sprint recorded Q3 revenues of $10.5 billion, up 8% from a year ago. But most of those revenue increases came from wireless services, which were driven primarily by acquisitions of a spate of affiliates over the last year and added revenues from Boost. Wireless revenue increased 14% year-over-year $8.2 billion wireless service revenues, while revenues in its legacy long-distance business fell 6% to $1.6 billion. Its profits for the quarter fell to $247 million from $516 million a year ago though that was before the Nextel acquisition.

Postpaid average revenue per subscriber fell from $64.50 a month to $61 a month over the last year, and prepaid ARPU fell from $37 to $32.50. Though its revenue per subscriber continues to dip, Sprint is seeing a growing proportion of that revenue come from data. It recorded data postpaid data ARPU of $7.75 or 12.7% of postpaid revenues. On the CDMA side, where its core 3G networks and PowerVision service attract hard-core data users, Sprint said data ARPU exceeded $10 a month. Sprint now has its EV-DO networks covering half of the countries population, centered in major metro markets, and plans to have 200 million pops covered by year end. Sprint also said it has 1.6 million PowerVision subscribers using new EV-DO handsets and advanced data services.

Sprint is definitely one of the most progressive carriers in terms of technology, having launched its first EV-DO rev. A network earlier this week and committing to a nationwide rollout of WiMAX over the summer. But those moves haven’t helped Sprint gain or keep customers, which are moving more and more toward Cingular and Verizon Wireless. Cingular added 1.4 million subs in the 3^rd quarter while Verizon Wireless has not yet announced its Q3 results. Sprint is trying to rectify that situation, launching a new advertising campaign focusing on its advanced wireless assets. Sprint officials said they believe the campaign will begin to bring customers back to Sprint particular high-value customer interested in data capabilities. Sprint is also launching hybrid iDEN-CDMA EV-DO phones, hoping to bring its high-value Nextel customers over to robust data plans.

On the wireline side, Sprint is seeing some benefits from its partnership with the cable companies. Sprint is already powering 1.3 million cable telephony lines with its VoIP service, and it has begun pilot projects in seven markets for its fixed-mobile convergence project with several of the major MSOs. Sprint said it plans to launch commercial service next year on the project. In addition, it will add an additional 800,000 VoIP customers from Time Warner Cable.

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