Sprint: Tourniquet, Please, Redux
by John Paczkowski
Posted on May 4, 2009 at 6:35 AM PT
It’s almost as if Sprint Nextel’s postpaid customers can hardly wait for their contracts to expire so they can jump to another carrier. The troubled wireless carrier lost more than one million postpaids in the first quarter of 2009 amid fierce competition from rivals AT&T (T) and Verizon Wireless (VZ). “We are far from satisfied with our postpaid performance,” Sprint CEO Dan Hesse said during a conference call with analysts. “We need to do better.”
Indeed. Because while Sprint (S) offset many of those postpaid defections with big gains in the prepaid and wholesale markets–the company lost only 182,000 subscribers, net, thanks to additions from Boost Mobile and to its partnership with Amazon (AMZN) for the Amazon Kindle–postpaid subscribers are the industry’s most valuable. They usually spend more on their service, and because they’re typically bound by contract, they’re less likely to cancel service as customers who aren’t. So, the fact that Sprint’s postpaid subscribers have been fleeing the company in droves for six straight quarters is not a good sign. That said, this is the the largest quarter-to-quarter improvement in net customer additions at Sprint Nextel in recent memory (click on chart below), so things are improving, if only a bit.
Sprint posted a loss of $594 million or 21 cents per share in its first quarter, a decline of 18 percent, compared with a loss of $505 million or 18 cents per share for the same period a year ago. Revenue was $8.21 billion, down about 12 percent, and a fair bit less than the $8.28 billion analysts had been expecting.
One hopes the debut of Palm’s (PALM) new Pre handset in the months ahead will do something to change that.
Comments
James Fisher from Sprint here. A bleeding Julia Child? Remember, that cut or not, she still cooked a delicious dinner. Yes, as Dan Hesse made clear, we are not satisfied with our losses of post-paid subscribers. But Dan also noted that half the decisions in today’s economy are in the prepaid arena and we are well positioned, as we demonstrated in the first quarter to take advantage of that. We are also well positioned in wholesale, as you acknowledge. Regarding our post-paid losses, we are making clear, measurable progress on several fronts to strengthen that business: customer service metrics have improved each month for 15 months straight; J.D. Power and others are confirming our network quality; we have not only the Palm Pre in our line-up, but other devices that we believe will be exciting and take great advantage of the capabilities of our Now Network. And we make it simple to buy and use our services. So our post-paid performance isn’t as tasty as we want it to be, but we’re using the best ingredients, and the cooking is underway. Give us some time for the flavors to meld, then as Julia would say: Bon Appetit!
Posted by James Fisher at May 4th, 2009 at 10:07 amSprint is got the be the worst example of a properly run company I have ever had the displeasure of doing business with. As for Mer. Fishers comments, the wholesale side is NOT doing well. This economy and advances in technology such as voip has forced many resellers out of business, the Pre will not be as sucessful as Sprint is touting. IT will be an Extinct #2, and the Kindle will not be the saving grace that people at Sprint think it will be. The Kindle is not the only e-reader, people can get news for free from the internet and free books from the library. This economy is not a good time to launch a $300+ device, the days of frivolous discretionary spending is gone and will not return for some time. It may work well in the college/textbook market but only if the textbook downloads are cheap enough to justify buying the unit up front and only if Amazon and Sprint are able to negotiate some sort of exclusivity within that realm.
Posted by Joe Golf at May 6th, 2009 at 4:11 pmThe timing of the Pre could not be more off and it is too late for a brand that has lost many many loyal users to Apple and Blackberry. They have built the momentum and branded the smartphone well enough to leave Palm back in the day of the PDA, which is no longer needed or relevent. The apps alone on the iPhone are a huge huge threat to Pre and with the lackluster customer service that Sprint is so famous for, I am doubtful that Sprint will be able to support and more importantly, retain cutomers loyalty to a 2nd rate has been brand.
As for the prepaid gains you speak of, are those the ones that are currently getting delayed texts because the Nextel iDen network you run Boost on is not capable of handling the traffic for SMS. Another example of Sprint putting the cart before the horse and the cart seems to have got stuck in a pot hole.
Sprint is doomed for either a takeover or BK and anyone who doesn’t wake up and hear the ringtones, needs their pinkslip ASAP. I know Sprint has plenty of those to go around.