Sunday, May 3, 2009

Sprint Nextel Loses Subscribers in Q1 but Sees Progress in Goals

Sprint lost approximately 182,000 wireless customers in Q1, giving it a total subscriber base of 49.1 million customers at the end of the quarter, compared to 49.3 million at the end of 2008. The company reported consolidated net operating revenues of $8.2 billion and a diluted loss per share of 21 cents. Consolidated net operating revenues were 12% lower than in the first quarter of 2008 and 3% lower than the fourth quarter of 2008. Both the year-over-year and sequential decline are primarily due to a lower contribution from Wireless and lower Wireline voice revenue. The company recorded $327 million of severance and exit costs, primarily related to the reduction in work force announced in January 2009.

"In the first quarter, we again made progress in our major areas of focus: financial stability, improving the customer experience and reinvigorating the brand," said Dan Hesse, Sprint Nextel CEO. "We achieved the largest sequential improvement in overall gross adds and net adds in Sprint Nextel history, reduced churn versus the prior year, and we generated more than enough cash in this quarter alone to pay all of our 2009 debt maturities.

"In customer care, our consecutive monthly improvement in first call resolution and customer satisfaction metrics has now extended to 15 months. This occurred even as we reduced cost by discontinuing the use of another six vendor call centers in the first quarter, bringing the reduction in call centers to 17 over the past 12 months. We performed well in the J.D. Power 2009 Wireless Call Quality Performance Study, including a tie for first place in the Western region, and achieved other third-party confirmations of our solid network performance," Hesse said.

Some highlights for the quarter:

  • Sprint will be the exclusive carrier partner for the new Palm Pre

  • Capital expenditures were $291 million in the quarter, compared to $548 million in the fourth quarter of 2008 and $1.4 billion in the first quarter of 2008. The decrease reflects lower spending in both the Wireless and Wireline segments. Included in first and fourth quarter 2008 capital expenditures is $236 million and $90 million respectively in non-recurring capital expenditures related to the deployment of WiMAX prior to the closing of the Clearwire transaction.

  • Net debt decreased by approximately $800 million from the end of the fourth quarter, to $17.1 billion.

  • Of the 49.1 million customers, 35.4 million are post-paid subscribers (25.3 million on CDMA, 8.9 million on iDEN, and 1.2 million Power Source users who utilize both networks), 4.3 million prepaid subscribers (3.5 million on iDEN and 800,000 on CDMA) and 9.4 million wholesale and affiliate subscribers, all of whom utilize the CDMA network.

  • The wireless customers losses include 1.25 million post-paid customers -- comprising 531,000 CDMA and 719,000 iDEN customers (including a net 94,000 customers who transferred from the iDEN network to the CDMA network). The company also lost 90,000 prepaid CDMA customers. The company gained a net 764,000 prepaid iDEN customers and 394,000 wholesale and affiliate subscribers. The company achieved total subscriber growth on the iDEN network.

  • About 8.6% of post-paid customers upgraded their handsets during the first quarter, resulting in increased contract renewals.

  • Post-paid churn was 2.25% compared to 2.16% in the fourth quarter and 2.45% in the year-ago period. The sequential increase in churn is primarily driven by deactivations on business lines, made worse by current economic conditions, and the year-over-year decrease is due to the improvement in the credit quality of our customer base and was achieved in spite of a reduction in customer credits.

  • Boost churn in the first quarter was 6.86%, compared to 8.20% in the fourth quarter of 2008 and 9.93% in the year-ago period. The year-over-year improvement in churn is due to fewer deactivations, and the sequential improvement is due to fewer deactivations and a slightly larger subscriber base as a result of the national Boost Monthly Unlimited offer.

  • Wireless post-paid ARPU in the quarter was stable sequentially and year-over-year at $56, primarily due to growth in fixed-rate bundled plans such as Simply Everything, offset by seasonal declines in usage.

  • Data revenues contributed greater than $15 to overall post-paid ARPU in the first quarter, led by growth in CDMA data ARPU. CDMA data ARPU increased about 5% from the fourth quarter, to greater than $18, an industry-best that now represents more than 31% of total CDMA ARPU.

  • Prepaid ARPU in the quarter was approximately $31 compared to $29 in the year-ago period and $30 in the fourth quarter of 2008. The year-over-year and sequential increases reflect a growing contribution from prepaid subscribers on unlimited plans.

  • Wireline revenues of $1.5 billion for the quarter were almost 4% lower sequentially and 10% lower year-over-year as legacy voice and data declines offset Internet revenue growth.

  • Wireline Internet revenues for the quarter increased 16% from the year-ago period and 2% sequentially. The year-over-year increase reflects strong enterprise demand for Global MPLS services and the increasing base of cable subscribers who utilize VoIP services. Internet revenues as a percent of Wireline revenue have increased from 30% in the first quarter of 2008 to 39% in the first quarter of 2009. At the end of the first quarter, the company supported approximately 4.6 million users of cable partner VoIP services. These services are currently available to almost 31 million MSO households.

  • Wireline capital expenditures were $77 million in the first quarter, compared to $110 million in the fourth quarter of 2008 and $148 million in the first quarter of 2008. The company made significant capital investments in prior years to build out its IP network, and less capital was required year-over-year and sequentially as the pace of its IP growth rate has slowed.

  • Sprint Nextel anticipates that an increasing number of wireless customers could choose prepaid services instead of post-paid services in this economic environment. Nevertheless, the company continues to expect that not only prepaid, but also post-paid and total subscriber full-year losses should improve in 2009 as compared to 2008. In addition, the company still expects that full-year capital expenditures in 2009 will be consistent with 2008 levels, excluding WiMAX.