Sprint Earnings: Subscribers Down, Narrowed Losses Celebrated, Still No Pre Numbers... 58
The company tried its best to paint a pretty picture, but there was no escaping the reality of the numbers for Sprint's second quarter 2009:
Bad news: There was a net subscriber loss of 257,000. Looked at from a different angle, according to the Financial Times, "the number of Sprint’s contract subscribers fell by 991,000 to 34.4m in the second quarter, a steeper loss than the 776,000 subscribers it lost in the same period last year, but narrower than the 1.25m it lost during the first quarter."
Good News: The churn rate on the so-called post-paid customers, who are the most lucrative, improved slightly 2.05 percent in the second quarter, down from 2.25 percent in the first quarter and up from 1.98 percent a year earlier. Bad news: still much higher than other carriers.
More good, bad, and middlin' news after the break!
Bad News: there was a net loss of $384 million, or 13 cents a share on consolidated net operating revenues of $8.1 billion. A year earlier loss of $344 million, or 12 cents a share.
Middlin' News: Sprint generated Free Cash Flow of $676 million in the quarter and $1.5 billion in the first half of 2009. Free Cash Flow is the change in cash and cash equivalents less the change in debt, investment in certain securities, proceeds from common stock and other financing activities, net. Sprint said they believe that Free Cash Flow provides useful information to investors, analysts and their management about the cash generated by our core operations after interest and dividends and their ability to fund scheduled debt maturities and other financing activities, including discretionary refinancing and retirement of debt and purchase or sale of investments.
Middlin' News: as of June 30, 2009, Sprint had $4.6 billion of cash and cash equivalents and $1.5 billion of borrowing capacity available under its revolving bank credit facility, for a total liquidity of $6.1 billion.
Whatever Hesse says News: Sprint seems to be celebrating "narrowed losses."
The earnings release quoted Dan Hesse, Sprint's CEO, who said:
"In the second quarter, we made further progress on our efforts to enhance financial stability, improve the customer experience and reinvigorate the brand. The widespread visibility surrounding our record-breaking June launch of the Palm® Pre™ handset gave us an unprecedented opportunity to showcase these improvements to customers as ‘a new Sprint.'"
Annoying Non-News: There was no indication of how many Palm Pres were activated during the quarter.
Still, Roger Cheng of The Wall Street Journal quoted Hesse saying the Palm Pre was "the smoothest and best executed new device launch in our history."
Cheng's story also noted that per Hesse, "Sprint is working to boost the Pre inventory at third-party retailers such as Best Buy Co., which should attract new users."
Side News: Sprint has acquired pre-pay carrier Virgin Mobile. In his write-up, Larry Dignan, the editor-in-chief at ZDNet, notes the purchase of Virgin Mobile, and raises the question: "what Sprint wants to be when it grows up. By focusing on the prepaid business Sprint risks blowing apart its profit margins." Virgin Mobile USA transaction should enable Sprint to more than double the number of pre-paid customers (Boost mobile has over 5m subscribers. Virgin Mobile USA had 5.3m pre-paid customers at the end of March)
There seem to be more questions than answers.
- Are slowing losses good enough?
- Will Sprint ever be able to siphon customers from Verizon and AT&T?
- Will we EVER know how many Palm Pre devices have been sold (or returned for that matter)?
Not surprising news: SPRINT NXTEL CP (NYSE: S) is trading down today.
Seeking Alpha has the transcript from the Earnings Call if you want to read more on what what said.
58 Comments
i think sprint is doing much better than they used to be.
my family has been with sprint for 13 or 14 years.. HUGE difference now than 3 years ago.
They did have a supposed game changer- the Treo. The first network to carry it. And the Treo phenomenon did quite a lot to help both Sprint and Palm.
Unfortunately, Palm really did nothing much to improve the Treo over the years... my last one *still* didn't have WiFi or a usable browser and was slow and unreliable. Had Palm moved PalmOS to Linux several years ago like they said they were going to do, they could have released something much more interesting, much sooner.
Now it has the Pre- a really nice touchscreen smartphone that runs Unix. But the iphone is also a really nice touchscreen smartphone that runs Unix. And the G1 Android is a really nice touchscreen smartphone that runs Unix.... and there were be lots of additional Android phones coming soon.
Is the Pre too little too late? Quite possibly.... especially if they don't fix its problems, offer a *LOT* more apps, and get on additional networks.
Let's hope they can!
I'm a very happy Sprint customer. They are taking care of their existing customers, making them a better solution than many other providers.
Twitter is all a-buzz that the Pre didn't save Sprint. However, I think we already knew that the Pre was being picked up by existing Sprint customers and to expect very little "new" customers to adopt until there's been some maturity on the webOS platform. Boy how the media loves to embellish misery and beat-down Palm....
this isn't great news for sprint or palm. But much worse for sprint. I've only seen one quote where the CEO said basically, the loss would be much worse if not for the pre. So regardless the media perception is not going to be that positive since he's not exactly trumpeting.
as for earnings and numbers i don't know if you'll get that until either palm says them or they hit some sort of landmark number like a million or something. And i don't think palm reports earnings until the end of August (not positive on that).
don't have a quote cause i closed the page a while back but something interesting i read was sprint's it's money losing problem specifically is it's Nextel walkie talkie service and that Pre can't help that market, i guess since it's not a walkie-talkie.
i'm sure it also doesn't help that both Palm and Sprint have all planning skills of the Bush war team and the marketing savvy of the people that brought you new coke.
I think what they were talking about is the Nextel's main subscribers were construction and other businesses that used direct connect to avoid using minutes. It's an old feature that they should have dumped. I'm sure they would lose a few but not the numbers they have lost by stocking crappy phones to support the feature instead of more high end smart phones.
fair point. That sounds like what they could be referring to. I read a very interesting article that said aT&T liked blackberry customers more then ipod customers because the way the blackberry works costs significantly less to AT&T then ipod users and thus were much more profitable per user. i think it had to do with a higher cost to move the ipod data then the blackberry data. Not analogous but maybe it's a similar broad issue with sprint where the nextel customer's using direct connect just aren't profitable enough just like the ipod customer's may be less profitable for AT&T (though i'm quite sure not nearly a problem like the direct connect seem to be.)
This is kinda weird, because sprint just acquired Virgin Mobile.. I think Sprint is doing better than whats being reported.
Yeah it is a little weird, they bought nextel, boost, and virgin... They apparently have extra money. Maybe its for a bigger plan?? Who knows.
Boost Mobile is a prepaid service and is very profitable for sprint. the purchase of Virgin is to add to the Boost mobile type service cause it too is prepaid. Sprint is, as i read somewhere, "doubling down" on buying a business that is more profitable. as i mentioned earlier i read it's an aspect of the nextel walkie talkie business that is a problem.
The second quarter includes April, May, and June (For all of you who don't know!). You cannot say- if you know anything about finance- that the Pre did not save Sprint since it was launched in June. It's funny that some of you don't get that. The real indication of the Pre impact will not be completely materliazed until the end of the year.
991k lost this Q2 and 1.2m Q1 We can assume that some 200k+ Pre were sold. If Sprint is able to sell 120-150K a month for the next three month (Q3) can we say that Sprint will be lossing somewhere around 450K post paid costumers next quater??
Will the Blackberry Tour Help?
I have been a Sprint customer for 10 years. And my experience was a lot like yours....
In the past, I would rate Sprint low on customer service and tech support and dismal stores. But they had the devices I wanted (Treo). And every time I changed phones they screwed up my plan/bill in some way. Double billing, not adding something I specified, sneaking in some other charge, etc. I had to spent forever on the phone getting things corrected.
But when I bought the Pre- it was a breeze. Perfect service, great help, super easy activation, and the billing was perfect. I don't know if there are any changes in the tech support (since I haven't needed them), but I have to rate the whole experience a 10 out of 10 (and I am not easy to please).
As a long-term customer who was not under contract (out of contract for at least 1.5 years), I think they could have at least given me SOME type of perk for staying with them. Oh well!
What baffles me is that with the iPhone becoming less and less appealing due to its old and tired one-app-at-a-time operation; Apple's arbitrary iron-fisted tactics toward its developers; and AT&T's creaking, overwhelmed network that is collapsing, losing data networking today, voice mails a few weeks ago, and still incapable of simple MMS, people are still flowing like lemmings away from Sprint and the Pre to sign up for the costly abuse-fest that is an iPhone/AT&T contract. I always knew iCultists were stupider than the below-average bear, but it's worse than I originally thought.
i think the reality of the consumer is most average consumers do not care about "iron fisted tactics", "one app at a time operation, ands some other thngs. They want an ipod with a phone on it and a product made by apple. Simple as that. It's like when people say "yeah android is open source." But i've had tmobile when the G1 was released and i've never ever heard one of my friends or anybody not on the internet ever mention, "thank god it's open source." I've never heard it by anyone looking at the phone in the store. I think most phone buyers don't care about that sort of thing.
i have nothing against apple. i have three ipods. one i bought just to run with. i've had an Apple II and an Apple IIc. but i'm no fanboy. I'm PC now. But lot's of people are trendy. And Palm and it's feminine hygiene-like commercials are far from trendy.
so what explains the fact that verizon steals just as many if not more then att each quarter? Verizon has higher prices and generally crappier phones to pick from.
and if it's so simple as ads and corporte deals why cant sprint pull that off too?
actually i agree with you it's the corporate customers. All the giant companies use verizon or att. How many giant companies with thousands of lines do you see on sprint? Any friend i have with who has a corporate line from a big employer has att or verizon.
Most of the big companies care about the bean counters mostly and sprint is the cheapest of the big 3. So why dont they clean up the corporate accounts? Clearly somethign is wrong. I dont know what though.
Less people on my network?! Woohoo!
See this is the thing that is puzzling to me. I know I read somewhere that Verizon also lost subscribers 2nd quarter too. Also there was one that stated that AT&T was getting killed on they are paying to get the cheaper price on the iPhone. So could this all be that the industry is all in trouble. It would be interesting to see to see where all these subscribers are going. I mean are people moving to Pre-paid? How much is this corporate cut backs in employees and phones? Could it be that these subscribers no longer have phones and this is not a case of them going to another carrier.
The reason that people are still buying the iPhone is branding. It is the pet rock of the mobile industry. People want the shinny thing and most have no idea what else is out there. They just know that their tech nerd friend has had one since launch day 2 years ago and loves it. More than likely these people have never had a smart phone or have had one of the sad attempts at "iPhone Like features" like the Instinct or whatever and don't want to be burned again. The thing I find amazing is that most iPhone users I've talked to about the Pre vs iPhone, seem to not understand what Multi-tasking is or even how they would uses it if they had it. It's like they just thought all phones worked like feature phones from 4 years ago.
It's already been pointed out that this includes the April and May before the Pre's release. Also it was before their new phone plans were being pushed. Most of us know that there were huge shortages of Pres for the whole month of June. I think they are going to be in good shape when they release the numbers of the 3rd Quarter.
and if they are smart they'll have a horizontal slider and a no keyboard one. And i got a Pre cause of the keyboard but some people like that keyboardless look. And it negates these slider build quality issues too. And if i were them i'd be like blackberry. That is i'd be releasing a bunch of phones each year not one.
Like my all touchscreen and my EOS would need to be out by the end of January. Besides then you got you're platform on several carriers well before apple does.
Less people on my network?! Woohoo!
Sprint will be fine...the customer losses are decreasing..and we havent even factored in a full quarter of Palm Pre and Blackberry tour sales and contracts. The phones are getting better, as well as customer service. People have been saying they suck for the longest but somehow they are still standing and buying other companies.
I believe they were able to generate lots of cash by outsourcing the servicing and maintainence of their network to Ericcson (allowing them to cut staff), as well as selling a portion of it while still using them. Lots of revenue also came from their pre-paid business as well.
I know lots of people (at work) on other networks whose contracts will end in a month or two that are dying to switch to sprint to get the Pre (after seeing me play with it...lol). I dont think the first 4G network is going anywhere ;)~
if i understand correctly the problem with IDEN is, well, EVERYTHING about it. Only half kidding.
it's not compatiable with anyone else so you can't roam with it. So they have to make all their phones also have a cdma radio.
It has no real ability to upgrade to 3g or 4g so you have to get everyone off it and onto cdma at some point.
Since no one else uses it there's no economies of scale. There's not as many vendors that can make the phones nor the tower equipment for it.
and lastly there is somethign wrong with the spectrum that nextell got from the FCC to build their netwrok years ago. It interfere's with other uses- and worse yet I think some of the people it screws are emergency responders. So they had to make a deal with the fcc to vacate some of their spectrum and move someplace else- so again their network is dead end.
iden is just a mess. I GUESS that sprint is moving as many post paid subs to cdma equipment (or iden with cdma) as they can. But then for the current time they still have the iden network so it sounds like they cell prepaid people onto that to use it while they have it....
@Voirob
I think Sprint is a short-term (2to3quaters) value investment... It will go from $4 to around $7-8 after that is when I am selling, like Buffet said one puff and move along.