By Ryan Knutson and Ben Fox Rubin
Sprint Corp. said its first-quarter loss narrowed, as revenue
improved slightly and costs declined, though its number of contract
customers shrank.
The carrier said it lost roughly 750,000 of the most profitable
phone customers in the quarter. The losses were offset by 516,000
tablet additions, bringing total losses of the most profitable
postpaid customers to 333,000.
Sprint has been losing customers each quarter for more than two
years, initially largely due to the shutdown of its aging Nextel
network and more recently due in part to a massive network overhaul
that has resulted in more dropped calls in areas where construction
is taking place.
Executives said that network overhaul is nearly complete, and
Sprint hopes to begin adding customers in the second half of this
year. In areas where the network upgrade is more complete, customer
defections have declined significantly, Sprint Chief Executive Dan
Hesse said on a call with analysts.
It appears AT&T Inc. and T-Mobile US Inc. will be the
winners in the war for subscribers this quarter. Last week, Verizon
Communications Inc. said it lost phone customers for the first
time, while AT&T had much stronger results. T-Mobile reports
its first quarter results Thursday.
For the quarter, Sprint reported a loss of $151 million,
compared with a year-earlier loss of $643 million. Revenue edged up
0.9% to $8.9 billion.
Operating expenses shrank about 3.5% to $8.46 billion.
Sprint's revenue per user fell from a year earlier. Executives
said more than a million customers have adopted the company's
"Framily" plan, which offers price reductions as more people are
added to a cellphone plan.
Sprint hopes revenue per user will improve as it persuades
customers to buy insurance plans, upgrade to unlimited data and buy
tablets, Sprint Chief Financial Officer Joe Euteneuer said in an
interview.
Sprint also said 29% of the people who bought devices in the
quarter did so without the help of subsidies--a trend that was
pronounced at AT&T as well. Mr. Euteneuer said this trend will
help the carrier save on marketing costs and shifts pressure for
selling devices away from the carrier onto phone makers.
The shift could ultimately put pressure on sellers of expensive
phones like Apple Inc., though Apple sold a surprisingly large
number of iPhones in the quarter.
Sprint and smaller rival T-Mobile have been considering a
possible acquisition, but no formal tie-up has been proposed. Both
cellphone carriers could face significant antitrust issues, as
regulators have made clear they will oppose more deals in the
wireless market.
Despite that challenge, Sprint Chairman Masayoshi Son has said a
combined company could help lower prices for customers and create a
substantial competitor against market leaders Verizon and
AT&T.
Last week, federal regulators outlined plans to modify a
so-called "spectrum screen" that would make it more difficult for
Sprint to do deals with other companies or acquire more spectrum.
Mr. Euteneuer said there were a lot of moving parts to the
government rules and declined to comment on how it might affect
future transactions.
Mr. Hesse also declined to comment on the possibility of a
Sprint deal with T-Mobile, only reiterating past statements that
consolidation "would yield a more competitive industry and would be
good for consumers."
Sprint's loss of 333,000 net postpaid subscribers--the
industry's most lucrative phone customers--compared with losses of
69,000 in the fourth quarter and a loss of 560,000 a year earlier.
Total wireless net losses were 467,000, compared with a gain in the
prior quarter, because of declines in prepaid and contract
customers, though wholesale and affiliate customers rose.
The total postpaid customer turnover rate was 2.18%, compared
with 2.09% a year ago.
Write to Ryan Knutson at ryan.knutson@wsj.com and Ben Fox Rubin
at ben.rubin@wsj.com
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