Sprint Narrows Customer Gap in Q1, Sees Prepaid Pickup in Second Half

Sprint Nextel lost a total of 75,000 wireless subscribers on a net basis in Q1 vs. a loss of 182,000 in the year-earlier period. The carrier said it had a loss of $865 million, up from $594 million a year earlier. Prepaid momentum is expected to pick up in the second half of the year, CEO Dan Hesse said on a conference call Wednesday, and he expects improving customer growth in both the prepaid and postpaid segments.

The 578,000 postpaid customers Sprint lost in the quarter were 670,000 fewer than it lost in Q1 2009. There were 348,000 net prepaid customer additions. Sprint also added 155,000 wholesale and affiliate subscribers as a result of growth in its MVNO business. There were some signs of a comeback on business spending, but recovery is slower than on the consumer side, Hesse said: “I never said Sprint’s turnaround would be quick or would be easy.” Customer turnover is expected to improve noticeably, he said. A priority is stabilizing operations this year, Chief Financial Officer Bob Brust said. Sprint will begin its multi-brand prepaid strategy in the next few weeks, said prepaid unit head Dan Schulman. The company had 48.1 million wireless subscribers on March 31.

Offering prepaid services on a WiMAX network is possible, Hesse said. “Stay tuned, especially as you see Dan Schulman and his prepaid team roll out their multi-brand strategy -- things will become more apparent.” Due to Sprint’s majority stake in Clearwire and the nature of the contract, Sprint has a “founder’s preference discount” that gives it a wholesale pricing advantage over other Clearwire wholesale partners, Hesse said. The integration of Virgin Mobile USA is going better than expected, Schulman said. Sprint will re-launch the Virgin brand in May as well as another brand focused on pay-as-you-go subscribers, he said. The carrier’s postpaid churn in the quarter was 2.15 percent, down from 2.25 percent in the year-ago period. Prepaid churn was 5.74 percent vs. 6.86 percent a year earlier.

Sprint remains committed to its iDEN network, though it’s continually looking at technologies as the market evolves, Hesse said. But no decision has been made, he emphasized. “We will continually look at what’s the best utilization of our spectrum assets and what are the best technologies available to provide the applications that our customers want. … We're thinking long term in terms of an evolution plan.” The carrier supports re-auction of D-Block, Hesse said. He declined to comment on the prospect of Apple creating an iPhone running on Sprint’s network, but acknowledged “there’s no question Apple is a strong brand.” Carrying an iPhone on Sprint’s network, he said, would “clearly drive more customers."