Sprint Slows Defections, but Loses $478 Million

Sprint Slows Defections, but Loses $478 Million
By JENNA WORTHAM
Copyright by Reuters
Published: October 29, 2009
http://www.nytimes.com/2009/10/30/technology/companies/30sprint.html?th&emc=th


Sprint Nextel reported Thursday that fewer customers are fleeing its cellphone service, providing some evidence that the company’s turnaround efforts were having an impact.

Sprint's chief, Daniel Hesse, cited successes but said it still had “much progress to make.”

Sprint said that during the third quarter, it lost 801,000 of its most profitable customers, those subscribers who sign contracts for cellphone service. However, the losses were considerably lower than in previous quarters. The company reported a defection of 991,000 customers in the second quarter, and 1.25 million customers in the first quarter.

Daniel R. Hesse, chief executive, told investors in a conference call that Sprint was just beginning to turn the corner.

“We had some successes in the third quarter, but we still have much progress to make,” Mr. Hesse said. “We are far from satisfied that we have not returned to subscriber growth.”

Sprint, the third-largest wireless carrier in the United States after AT&T and Verizon, is slowly beginning to change the public perception of poor customer service and call quality, Mr. Hesse said. The company is selling new phone models that it hopes will help retain customers. “A year ago, our device lineup was considered a weakness,” Mr. Hesse said in an interview. “And now, a lot of people consider us to have one of the strongest lineups in the industry.”

In June, Sprint introduced the Palm Pre, its sleek smartphone, and recently announced plans to begin selling the Palm Pixi, a smartphone geared toward younger users. In addition, Sprint began selling the HTC Hero this month. It also said it would begin selling in November the Samsung Moment, which will also run on Android, Google’s mobile operating system.

The company said Thursday that it lost $478 million, or 17 cents a share, in the quarter, compared with $326 million, or 11 cents, in the same period a year ago.

Wall Street analysts had expected a loss of 15 cents a share, according to a survey by Thomson Reuters. Sprint’s stock fell 15 cents, or 4.63 percent, to $3.09 Thursday.

Revenue declined 9 percent, to $8.04 billion, beating analysts’ forecast of a loss of $8.09 billion.

Sprint is increasing the number of customers who pay in advance for cellphone service, which has helped offset the loss of business consumers. The company has been heavily marketing its Boost Mobile brand, which offers a $50-a-month unlimited voice, data and texting. In July, Spring announced plans to acquire Virgin Mobile USA, a prepaid operator. Prepaid customers, who do not sign a long-term contract, do not generate as much revenue as postpaid customers who sign contracts.

“If you look at what elements of the industry are seeing growth, it’s prepaid,” Mr. Hesse said. “Absolutely, we’d like to be the leader in the prepaid, but it’s still a smaller part of Sprint’s business.”

Sprint’s difficulties in retaining subscribers have been worsened by the recession and the saturation of the wireless industry, said Craig Moffett, an analyst with Sanford C. Bernstein & Company. “Sprint is a better company than it was a year ago, but unfortunately, it’s a less attractive industry than it was a year ago,” he said.

Mr. Moffett said the mobile industry was going to become even more challenging for all of the wireless carriers. “This is a company that is learning how to swim just as the water is getting drained out of the swimming pool,” he said. “There’s not enough growth in the wireless market for them to pull off a turnaround.”

Mr. Hesse emphasized the importance of Sprint’s next-generation wireless network. The company has introduced the service, in conjunction with its affiliate Clearwire, in 17 American cities, with plans to continue deployment next year. “We think 4G will move the needle,” he said. “We’ll be the only game in town in 2010. That’s a big deal.”