Sprint slips into the red

Sprint reported a $211 million loss for the 1^st quarter as the company continues to shed postpaid customers and lose ground to its two larger competitors AT&T and Verizon Wireless.

Sprint added 600,000 net subscriber in the first three months of the year, but three-quarters of those adds were from its wholesale business, another 275,000 came from Boost prepaid additions and 46,000 from affiliates. Sprint, however, saw its core postpaid subscribers decline by 220,000, mainly due to flight from its Nextel iDEN network. Sprint ended the quarter with 53.6 million subscribers total, up 1% from the 4^th quarter. Of that base, 78% were postpaid users, 8% were Boost customers and 14% were wholesale or affiliate customers.

“In the second half of 2006 we began implementing a plan that included numerous initiatives that were targeted at returning the core wireless business to profitable long-term growth,” said chairman and CEO Gary Forsee at Sprint’s earnings call this morning. “We’ve indicated it would take time to improve our operating results.”

But Forsee added that Sprint has done plenty to turn the company around. Revenues improved incrementally from $10.1 billion from $10.07 billion a quarter a year ago, cash flows improved, Sprint has launched new advertising and marketing campaign and it has been shutting down stores and reducing head-count by 5000, Forsee said, adding that its earnings are lagging the improvements.

Forsee said that the current quarter would reveal vast improvements, including the reigning in of Sprint’s spiraling churn rate. Postpaid churn for the 1^st quarter was 2.3%, level with Q4 and up from 2.1% year-over-year, but Forsee said it would fall to 2% this quarter. While an improvement, the rate would still be far higher than the 1.1% and 1.7% churn rates Verizon Wireless and Cingular respectively posted for the first quarter.

One bright spot in Sprint’s earnings is its increasing data revenue. It brought in $1.2 billion in data revenues for the first quarter, up 44% year over year and accounting for 16% of its retail postpaid service revenues. Sprint calculated a monthly data ARPU of $9.25, one of the highest in the industry, but Sprint does not include its sizable wholesale or prepaid customer base in its figures. Much of that data growth was driven by the CDMA network, which Sprint is currently upgrading to EV-DO Revision A technology. Data accounted for 20% of CDMA ARPU, or $12.25 per customer per month. Sprint also said it’s nearing 1 million wireless PC data cards on the network.

The rising data revenue, however, was not enough to offset the decline in overall ARPU. Postpaid ARPU fell to $59, down 5% year-over-year, though most of that came from the Nextel network. Sprint reported CDMA ARPU declined 1% while iDEN ARPU dropped 9% from last year. Boost Mobile saw a huge 12% boost in ARPU over the same period though, rising to $32 a month.