Sprint Sees Q2 Improvements, But Loss Widens

Citing higher postpaid ARPU, growth in the number of net prepaid subscribers and higher wireless equipment revenues, Sprint reported consolidated net operating revenues of $8.3 billion for Q2, 4 percent higher than in the second quarter of 2010 and remained relatively flat as compared to the first quarter of 2011. Adjusted OIBDA was $1.3 billion for the quarter, including the estimated incremental impact of $120 million from customer acquisition and retention expenditures to remain competitive in the marketplace and $73 million related to disputes and settlements, including Clearwire, and ongoing Network Vision expenses. The company reported a net loss of $847 million and a diluted loss per share of 28 cents for the quarter, which includes $588 million in equity losses of unconsolidated investments and other ($.20 per share net of tax, which includes the effect of increased valuation allowance of $209 million) and a $52 million charge ($.02 per share, which includes approximately $19 million of related increase in valuation allowance) to tax expenses.


However, gains were partially offset by net losses of postpaid subscribers and lower wireline revenues.

"Sprint's second quarter results, including our fourteenth consecutive quarter of improved customer care satisfaction, our best ever postpaid churn, more than 1 million net wireless subscriber additions and wireless service revenue growth, validate that our focus on providing simplicity, value and an unmatched customer experience is working," said Dan Hesse, Sprint CEO.


Some highlights for Q2:


Wireline revenues of $1.1 billion for the quarter declined 14 percent year-over-year primarily as a result of an annual intercompany rate reduction based on market prices for voice and IP, the scheduled migration of wholesale cable VoIP customers off of Sprint's IP platform, and lower voice volume. Sequentially, second quarter wireline revenues declined almost 3 percent primarily as a result of continued migration of wholesale cable VoIP customers off of Sprint's IP platform.


The company served over 52 million customers at the end of the second quarter of 2011. This includes 32.9 million postpaid subscribers (27.7 million via the Sprint brand on CDMA, 5 million on iDEN, and 268,000 Nextel PowerSource users who utilize both networks), 13.8 million prepaid subscribers (11.1 million on CDMA and 2.7 million on iDEN) and approximately 5.4 million wholesale and affiliate subscribers, all of whom utilize our CDMA network.


For the quarter, Sprint added nearly 1.1 million net wireless customers, including net additions of 573,000 retail subscribers and net additions of 519,000 wholesale and affiliate subscribers as a result of growth in prepaid MVNOs and M2M solutions.


Sprint lost approximately 101,000 net postpaid subscribers during the quarter, a net improvement of 127,000, or 56 percent, compared to the second quarter of 2010.


The CDMA network added approximately 226,000 net postpaid customers during the quarter, which includes net losses of 49,000 Nextel PowerSource customers. Excluding Nextel PowerSource customer losses, the Sprint brand added 275,000 net postpaid wireless subscribers. The iDEN network lost 327,000 net postpaid customers in the quarter.


The company added 674,000 net prepaid subscribers during the quarter, which includes net additions of 1.1 million prepaid CDMA customers, offset by losses of 475,000 net prepaid iDEN customers.


The credit quality of Sprint's end-of-period postpaid customers was approximately 83 percent prime.


Postpaid churn was 1.75 percent, compared to 1.85 percent for the year-ago period and 1.81 percent for the first quarter of 2011. Quarterly postpaid churn improved year-over-year and sequentially primarily as a result of a larger base of customers on fixed rate bundled plans or 4G handsets.


Approximately 9 percent of postpaid customers upgraded their handsets during the second quarter, reflecting strong demand for Sprint's handset portfolio and continued strength in contract renewals.


Prepaid churn for the second quarter of 2011 was 4.14 percent, compared to 5.61 percent for the year-ago period and 4.36 percent for the first quarter of 2011.


Wireless retail service revenues of $6.7 billion for the quarter represent an increase of almost 5 percent compared to the second quarter of 2010 and almost 1 percent compared to the first quarter of 2011.


Wireless postpaid ARPU increased year-over-year from $55 to $57, the largest year-over-year postpaid ARPU growth in over seven years. Year-over-year, ARPU benefited from higher monthly recurring revenues as a result of premium data add-on charges for smartphones and the greater popularity of fixed-rate bundle plans, partially offset by lower overage, casual data and text revenues. Sequentially, ARPU increased from $56 to $57, primarily as a result of growth in premium data add-on revenues.


Prepaid ARPU of $28 for the quarter declined slightly year-over-year and sequentially as a result of a greater mix of Assurance Wireless customers who on average have lower ARPU than the remainder of our prepaid subscriber base.


Capital expenditures, excluding capitalized interest of $102 million, were $640 million in the quarter, compared to $437 million in the second quarter of 2010 and $555 million in the first quarter of 2011.


Wireless capital expenditures were $546 million in the second quarter of 2011, compared to $319 million in the second quarter of 2010 and $449 million in the first quarter of 2011. During the quarter, the company invested primarily in data capacity as a result of increased data usage to maintain a competitive position in data service and overall network quality.


Wireline capital expenditures were $35 million in the second quarter of 2011, compared to $49 million in the second quarter of 2010 and $53 million in the first quarter of 2011. http://www.sprint.com