Sprint still losing money despite adding 1.1M customers
- — 29 April, 2011 01:41
Sprint added 1.1 million new wireless subscribers last quarter but the company still lost $439 million over the same period.
Admittedly, Sprint's net loss in the first quarter of 2011 was a vast improvement over the first quarter of 2010 when it posted a loss of $865 million. The company's operating revenues have also risen by 2.8 per cent year-over-year, going from $8.1 billion in Q1 2010 to $8.3 billion in Q1 2011.
IN THE NEWS: Sprint to fork over $1 billion to Clearwire
But it seems that Sprint will continue having trouble turning a steady profit until it begins to add postpaid subscribers, since postpaid subscriptions generate far more average revenue than prepaid subscriptions and have much lower churn rates. For instance, over this past quarter Sprint postpaid subscribers generated average revenue of $56 for the company and had a churn rate of 1.81 per cent. Prepaid subscribers, however, generated average revenue of $28 for the company and had a churn rate of 4.36 per cent over the same period.
On the quarter, Sprint gained 846,000 prepaid subscribers while actually losing 114,000 postpaid subscribers. The carrier's ability to add postpaid subscribers is still haunted by problems facing the iDEN network it acquired along with Nextel in 2005. Last quarter, for instance, Sprint recorded losses of 367,000 postpaid iDEN subscribers and 560,000 prepaid iDEN subscribers. These losses both offset the significant gains made by Sprint's CDMA network last quarter in both the postpaid market (253,000 net additions) and the prepaid market (1.4 million net additions).
The good news from this perspective is that Sprint is planning to phase out its iDEN network altogether in 2013, so the network's days of being an albatross for the carrier are limited. Even if Sprint weren't planning to phase out its iDEN network, it may have simply run out of iDEN customers by 2013 no matter what, as the carrier has lost nearly 4 million iDEN subscribers over the past two years alone.
Sprint is also dealing with headaches generated by its partners at Clearwire, as the carrier recently agreed to pay Clearwire a total of $1 billion over the next two years for the rights to wholesale its WiMAX network. Clearwire's operating expenses have soared over the past three years, going from $514 million in 2008 to $1.5 billion in 2009 to $2.8 billion in 2010. The company says that the vast majority of its capital expenditures over the past three years were incurred from network build-outs that have helped Clearwire bring its WiMAX services to every major market in the U.S. Even so, Clearwire's revenue has failed to keep up with the increased operating costs, resulting in a $2.3 billion loss in 2010, nearly double the $1.25 billion loss posted in 2009.
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