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Hard Times: Sprint Loses 1.3M Customers in Q4

Phil Harvey
LR Mobile News Analysis
Phil Harvey

Sprint Corp. (NYSE: S) lost nearly 9 wireless customers per minute during 2008, a sign that the carrier is far from healthy, even as it pays down debt and looks forward to being free cashflow positive this year. (See Sprint Reports Q4.)

The company's customer base dropped to 49.3 million customers at the end of 2008, compared to 53.8 million at the end of 2007. It lost 1.3 million wireless customers last quarter alone.

And Sprint is still losing money hand-in-hand with its customer defections. The nation's third largest wireless carrier recorded a net loss of $1.6 billion, or 57 cents a share, on revenues of $8.4 billion for the fourth quarter of 2008, compared to a net loss of $29.3 billion, or $10.31 a share, on revenues of $9.8 billion for the year-ago quarter.

For the full year 2008, the company's net loss was $2.8 billion, or 98 cents, on revenues of $35.6 billion, compared to a net loss of $29.4 billion, or $10.27 a share, on revenues of $40.1 billion, for the full year 2007.

The carrier says it generated $536 million in free cashflow (operating cashflow minus capital expenditures) in the fourth quarter and expects to be free cashflow positive in 2009.

As you might expect in tough times, Sprint's capital expenditures have slowed considerably. It spent $452 million on wireline capex for all of 2008, a 28 percent drop from its 2007 level. For wireless capex, the company spent $1.8 billion in 2008, a 63 percent drop from the previous year. It also noted that $560 million of that capex was related to WiMax deployments and won't occur again, because of the Clearwire LLC (Nasdaq: CLWR) transaction.

CEO Dan Hesse said during the conference call that a disproportionate amount of corporate churn, thanks to the bad economy, was affecting its business user base, which is normally stable. That may help explain the high customer loss for 2008.

"We're working very hard to convert those customers to Sprint after they leave their jobs," Hesse said, referring to workers laid off from Sprint's corporate customers.

The company didn't give clear guidance, but said it does expect that its post-paid and total subscriber losses will improve in 2009, "as compared to 2008."

The company said it expects full-year capital expenditures in 2009 to be consistent with 2008 levels, excluding WiMax, meaning it expects to spend far less than $3 billion next year in total capex.

— Phil Harvey, Editor-in-Chief, Light Reading

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User Rank: Light Beer
12/5/2012 | 4:11:19 PM
re: Hard Times: Sprint Loses 1.3M Customers in Q4
See 16Feb interview with Dan Hesse:

Hesse spent a big part of our interview talking about Sprint's 4G network, which is currently deployed in Baltimore and will soon launch in Portland, Ore. A national rollout is scheduled over the next couple of years. The service uses WiMAX technology, which is a high-speed broadband that can handle data with average speeds from 2 to 4 megabits per second.

So he spent the interview talking about "Clearwire" WiMAX network - meanwhile Sprint's dropping subs and cash at increasing alarming rates???

Is he in outer space??? Scary...
User Rank: Light Beer
12/5/2012 | 4:11:18 PM
re: Hard Times: Sprint Loses 1.3M Customers in Q4
Well, Sprint has an MVNO arrangement so they can sell Clearwire service under their brand name.

That'll be huge because if Sprint is to get better, its brand name has to stand for something besides also-ran phones and horrible customer service.

So Clearwire could be a huge help there.

User Rank: Light Beer
12/5/2012 | 4:11:17 PM
re: Hard Times: Sprint Loses 1.3M Customers in Q4
"Sprint will likely have to compete on the basis of price and they are going to have to get their operating expenses down to survive"

Yes, but execution is everything. They tried this approach before--cutting Nextel, cutting customer service, etc. until they finally realized that they were driving all their customers away (at least their new CEO seems to understand this).
User Rank: Light Beer
12/5/2012 | 4:11:17 PM
re: Hard Times: Sprint Loses 1.3M Customers in Q4
This is really a pretty garbled message from Hesse.

The Clearwire WiMAX network is based purely on a best effort architecture. It is designed for internet access only and not for voice. So, this is probabaly fine for air cards, but it is not suitable for voice/data handsets. This will not allow Sprint to compete with Verizon LTE or AT&T.

Sprint currently does not have any strong differentiation. AT&T has the iPhone, Verizon has great coverage and LTE (someday). Sprint will likely have to compete on the basis of price and they are going to have to get their operating expenses down to survive.

Maybe they should have offered me the CEO position. :-)

User Rank: Light Beer
12/5/2012 | 4:11:13 PM
re: Hard Times: Sprint Loses 1.3M Customers in Q4
Sprint spends billions on their network operational costs; outside of customer service etc... There are a number of areas that I would consider low hanging fruit. If you hit the customer experience (ex: customer support) you will absolutely drive customers away.

Hesse has been trying to find differentiation where there appears to be none. Nextel push to talk - nope, everyone has that one now. Oh ya, I love the commercial where he tells everyone to come in to the stores and their staff will teach you how to use your phone. Kinda like saying that you are too stupid to figure out the phone, but we will help you out. That one surely did not help. In addition, the black and white format conveys images of days gone by. Is that the right image for a technology company?

They need to do an Alltel; cheap and cheerful.

Just my humble opinion
User Rank: Light Beer
12/5/2012 | 4:11:13 PM
re: Hard Times: Sprint Loses 1.3M Customers in Q4
Hope the Palm Pre helps Sprint, it will be their iconic phone.
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