Advertisement

SKIP ADVERTISEMENT

IPhone Attracts Customers, but Sprint Loses $863 Million

Sprint Nextel on Wednesday reported a loss of $863 million in its first quarter, twice the size of its loss in the same quarter last year, but the company was encouraged by the new customers the iPhone was bringing it.

The company said its $863 million loss, or 29 cents a share, was primarily because of accelerated depreciation from the expected shutdown of the Nextel platform, the smaller carrier it merged with in 2005. The company’s revenue climbed 5 percent to $8.73 billion.

The loss was smaller than analysts had expected. They had projected a loss of 42 cents a share, according to a poll by FactSet. Sprint is the No. 3 carrier after Verizon Wireless and AT&T. The company, based in Overland Park, Kan., was optimistic about its growth in subscribers.

It reported that it added 1.1 million net subscribers, down from a gain of 1.6 million in the previous quarter. It said that it sold 1.5 million iPhones in the quarter — fewer than the 3.2 million iPhones that Verizon reported selling or the 4.3 million iPhones that AT&T said it activated in the quarter. Sprint began selling the iPhone in October 2011.

Daniel R. Hesse, chief executive of Sprint, said 44 percent of the people buying iPhones were new customers, evidence that Sprint was luring subscribers from its competitors, perhaps with its unlimited data plans, which AT&T and Verizon do not offer.

“The value and simplicity of our unlimited data, talk and text plans, combined with an unsurpassed customer experience and our increasingly robust device portfolio make for a strong combination,” Mr. Hesse said in a statement.

In an interview, he said that the company was pleased with the increase in the amount of money it was getting from each customer: average revenue per user, or A.R.P.U., grew 6.9 percent. He said that this number was increasing because 69 percent of Sprint’s customers now owned smartphones, and they were paying for bundled plans, which include phone calls, text messages and data in one package.

Image
A Sprint Nextel store in New York. Costs from the company’s shutdown of the Nextel platform reduced earnings this quarter.Credit...Victor J. Blue/Bloomberg News

Overall wireless services made $7.2 billion in revenue for Sprint over the quarter, up 7 percent compared with last year. Unlike AT&T and Verizon, Sprint does not report how much it is earning from wireless data plans specifically, because it sells its data plan as part of bundles. To get consumers to use data more — by browsing the Web, watching videos or listening to streaming music on their phones — carriers are racing to build fourth-generation networks. Those networks use a faster technology called Long Term Evolution, or LTE. Sprint said it planned to begin its 4G LTE in six cities by midyear. Verizon leads the LTE race, with the network deployed in 230 markets, and AT&T is in a distant second with LTE in 35 markets.

Building the LTE network is crucial for Sprint, which is placing a bet on the iPhone to reverse its declining fortunes. The carrier currently does not sell the new iPad, which is compatible with LTE networks, whereas Verizon and AT&T do. Because the iPad is compatible with LTE, analysts expect the next iPhone to also be compatible with the faster network. This raises questions about whether Sprint’s LTE network will be ready in time to sell the next iPhone.

Mr. Hesse expressed confidence that this would not be an issue. “We don’t think there’s risk of us not getting the next iPhone,” he said.

Sprint said it expected to deploy 12,000 more LTE cell sites, which will cover 120 million more people, by the end of the year.

Chetan Sharma, an independent telecom analyst, said that Sprint’s deployment of its fourth-generation network and its growth because of the iPhone were positive signs for the company. However, he said that the shutdown of Nextel would continue to hurt its financials in the coming year.

“It’s kind of a two-sided story,” he said. “LTE and the iPhone will represent the growth part of the story, but Nextel will continue to drag down the financials.”

Sprint suffered after its $70 billion merger with Nextel Communications, a smaller carrier, in 2005, because the companies struggled to combine their cultures and network technologies. To shut down Nextel, Sprint has to finish deactivating or repurposing its Nextel cell towers, Mr. Sharma said.

Sprint has said it does not expect the business generated by the iPhone to be profitable until 2014. By then the company should be closer to recovering, if all goes according to plan, Mr. Sharma said.

A version of this article appears in print on  , Section B, Page 2 of the New York edition with the headline: IPhone Attracts Customers, but Sprint Loses $863 Million. Order Reprints | Today’s Paper | Subscribe

Advertisement

SKIP ADVERTISEMENT