Sunday, May 11, 2008

Sprint Nextel Posts Continuing Losses of Subscribers, Revenue

Sprint Nextel reported disappointing Q1 2008 wireless revenue of $8.0 billion, down 9% compared to the year-ago period and down 6% from the fourth quarter of 2007. The declines are mainly due to lower average service revenue per customer and fewer post-paid subscribers. The total number of wireless subscribers declined by 1.09 million due to losses of 1.07 million post-paid subscribers and 543,000 traditional prepaid users, partially offset by gains of 343,000 Boost Unlimited and 183,000 wholesale and affiliate subscribers. Wireline revenues were $1.6 billion, a 2% increase from the first quarter of 2007 and a 1% increase from the fourth quarter. The growth is due to strong demand for IP services that more than offset declines in voice and data

In addition to the recently announced deal with Clearwire, Sprint's turnaround plan includes trimming capital expenditures. Q1-08 core capital spend was $1.12 billion as the company moderated its EVDO rev A expansion.

Some operational highlights:

  • Wireless had 52.8 million total subscribers at the end of the period, compared to 53.6 million at the end of the first quarter of 2007. The decline reflects a smaller post-paid and affiliate base, partially offset by increases in prepaid and wholesale.

  • At the end of the first quarter, the company was serving 39.7 million post-paid subscribers, 4.4 million prepaid and 8.7 million wholesale and affiliate users.

  • Subscribers by network platform include 35.5 million on CDMA, 15.7 million on iDEN and 1.6 million Power Source users who access both platforms.

  • In the first quarter, Sprint Nextel introduced Simply Everything service plans for CDMA and iDEN post-paid subscribers. These plans include an offering of unlimited voice, data, direct connect and message services for a fixed monthly fee of $99.99.

  • Post-paid churn of 2.45% for the quarter reflects higher voluntary deactivations in the CDMA subscriber base compared to the fourth quarter and a smaller subscriber base. Voluntary churn on the CDMA platform improved over the course of the first quarter. In the first quarter, total involuntary churn improved marginally from the fourth quarter but remained at an elevated level, representing about 40% of total post-paid churn. For the quarter, the overall CDMA churn rate was modestly below the overall post-paid churn rate and iDEN was modestly above.

  • Wireless service revenues declined 9% year-over-year and 6% sequentially due to lower average revenue per customer and fewer subscribers. Wholesale and affiliate service revenues were flat with the year-ago period and declined 6% sequentially due to lower pricing, partially offset by a larger base.

  • Wireless equipment revenues declined 9% compared to the year-ago period and were down 13% sequentially. The decline compared to the year-ago period is due to lower handset sales volumes, while the sequential decline is mainly due to more aggressive market pricing.

  • Average monthly post-paid ARPU in the CDMA base was modestly above the overall rate of a little under $56, while iDEN was modestly below. Compared to the first quarter of 2007, CDMA ARPU declined about $2 and IDEN ARPU was lower by about $6.

  • Post-paid ARPU continues to be impacted by customer migrations to lower-priced plans, a higher-than-average ARPU in deactivating subscribers, and increased customer concessions to improve retention. First quarter ARPU was also impacted by lower fee-based revenues and seasonally lower usage.

  • Data revenues contributed more than $11.50 to overall post-paid ARPU in the first quarter and more than $14, or approximately one-quarter, of CDMA ARPU. Overall data growth of 19% year-over-year was driven by strong sales of aircards and demand for messaging services.

  • Prepaid ARPU in the quarter was approximately $29 compared to $32 in the year-ago period and $28 in the fourth quarter of 2007. The sequential increase reflects growth in the Boost Unlimited subscriber base that is offsetting lower usage among traditional prepaid users.