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Feb. 10, 2010

Sprint Nextel has managed to cut some of its losses and continued to narrow down its postpaid churn rate in the fourth quarter of 2009.

Sprint's losses totaled $980 million, or 34 cents a share, compared with losses of $1.62 billion, or 57 cents a share for the corresponding period last year.

Mobile postpaid ARPU (average revenue per user) for the 4th quarter dropped year-over-year from $56.08 to about $55.14.

Sprint attributes the ARPU decline to a drop in usage and roaming, partially offset by reductions in credits issued to wireless customers resulting from an improved user experience.

For Q4 2009, prepaid churn for Sprint's Boost service was 5.56 percent, compared with 8.2 percent in the year-ago period and 6.65 percent in the third quarter of last year.

The wireless operator said the improvement in its churn rate is due to increased subscriber additions related to Boost's new unlimited offerings that are available since mid-December.

Overall, Sprint reduced its churn to 2.1 percent. That's down from about 2.17 percent in the year-ago quarter and 2.19 in the previous quarter.

Sprint Nextel ended the fourth quarter with a customer base of a little over 48.07 million customers, compared with about 48.28 million at the end of the third quarter of last year.

These numbers include a little over 33.92 million postpaid subscribers.

On average, Sprint Nextel has done quite a bit this past quarter to expand its device line-up. During the 4th quarter, the company added the HTC Hero, Samsung Intrepid, Motorola Debut, Samsung Moment, Palm Pixi and the popular Blackberry Curve model 8530.

Last month, Sprint launched the Overdrive 3G / 4G Mobile Hotspot by Sierra Wireless, LG Lotus Elite, Motorola Brute i680 and announced the availability of the LG Rumor Touch handset.

Additionally, Skiff has also signed a multi-year agreement with Sprint Nextel to provide 3G connectivity for its dedicated eReading devices in the U.S.

The wireless operator is predicting lower losses for this year, both for postpaid and total subscriber numbers as compared to last year.

This morning, Sprint's stock was down about 7.3 percent in early trading to $3.32 a share.

Last November, Sprint Nextel said it continued to lose cashflow and mobile customers. Instead of turning to the low-churn, high-end wireless users that have brought success to the likes of AT&T and Verizon Wireless, Sprint has instead placed its hopes on prepaid plans.

Some say this is a mistake but Sprint is going ahead with its acquisition of Virgin Mobile nevertheless.

Dan Hesse, Sprint CEO says “with continued growth in the U.S. prepaid segment, Sprint is further positioning itself as a leader. With Boost’s continued success and the iconic Virgin Mobile brand under one umbrella, Sprint will offer customers value and flexibility with great devices running on a dependable network with great coverage.”

In an earlier call with analysts, Hesse called prepaid a “potential growth engine.”

So yesterday Sprint closed its $483 million acquisition of Virgin Mobile USA, which was announced last July. What Virgin Mobile offers that a postpaid wireless carrier can’t is growth. At least that's what Sprint hopes.

“Industry growth is more on the prepaid side, which is another reason that we are doubling down on the prepaid market,” Hesse said. “We think there will be more growth there generally than in the postpaid market.”

There’s also a lot of competition out there, and Virgin Mobile is battling many of the same problems Sprint has been unable to resolve: customer defections and slumping sales.

Like Sprint, Virgin has battled subscriber defections and a high churn rate. The prepaid carrier recently lost about 270,000 customers and its churn rate continues to hover over 5 percent. For its part, Sprint fell almost $480 million into the red and lost 135,000 net retail customers to other carriers in its most recent quarter.

It will be some time before the effects of the Virgin Mobile acquisition become clear. So far in 2009, Sprint has had both successes and a few mishaps. For example, its launch of the Palm Pre rapidly fizzled out to just another smartphone release.

On the other hand, Sprint’s $50 unlimited plan for Boost customers was a major game-changer for the prepaid industry.

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Source: Sprint Nextel.