Sprint posts $1.4 billion loss in second quarter

The company's losses include an effort to move Nextel customers to a Sprint network

Sprint Nextel, the third largest mobile carrier in the U.S., has reported a net loss of US$1.4 billion for the second quarter of 2012, the 19th consecutive quarter of losses for the company.

Sprint on Thursday reported revenue of $8.8 billion for the quarter, up 6 percent from the second quarter of 2011. The net loss was 62 percent larger than in the second quarter of 2011 when the company reported an $847 million loss. It was the largest net loss for Sprint in a quarter since the fourth quarter of 2008.

About half of the losses were due to Sprint's network vision initiative, an effort to save money by consolidating multiple network technologies into one network and to roll out LTE service, officials said. The company is ahead of its projections to shut down old cell sites, officials said during a conference call.

In May, as part of the initiative, Sprint announced that it would move business and government customers from its 2G iDEN (integrated digital enhanced network) to its next-generation push-to-talk service on Sprint's 3G CDMA network by June 30, 2103.

Sprint spent US $704 million on its network vision initiative during the quarter, said Eric Costa, a research analyst for Technology Business Research.

"We're making progress in our core business operations, which funds these [network] investments," Dan Hesse, Sprint's CEO, said during the conference call. "We know we have much work ahead of us to achieve the margins we and our investors want."

It makes sense to retire iDEN because nearly half of the Nextel customers that left the iDEN network in recent years went to Verizon Wireless, with only 25 percent staying at Sprint, Hesse said.

Despite the loss, Sprint executives pointed to positive signs for the company. Even with "significant expenses" due to the network vision initiative, the company posted an adjusted OIBDA (operating income before depreciation and amortization) of $1.5 billion, compared to $1.3 billion for the second quarter of 2011, Hesse said.

Sprint also reported a record low post-paid churn for mobile customers during the quarter, and it posted a record growth in average revenue per user (ARPU) among mobile customers, Hesse said.

Churn and ARPU are the "two factors that are the most significant determinants" of the profitability of Sprint's post-paid mobile business, Hesse said.

Sprint added 442,000 post-paid customers and 141,000 prepaid customers during the quarter, but lost 688,000 Nextel post-paid customers. The company now has 56 million mobile customers. The company sold 1.5 million Apple iPhones during the quarter, with 40 percent of them to new customers.

Sprint recaptured 60 percent of the moving Nextel customers during the quarter, compared to only 27 percent in the second quarter of 2011 and 47 percent in the first quarter of this year, Costa noted.

Still, Sprint will continue to struggle financially throughout 2013, with the network vision spending offsetting gains in revenue, Costa said in an email. Look for improve results in 2014, when Sprint begins to see the $10 billion benefits of network vision, he said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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Grant Gross

IDG News Service
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