Sprint Feels the Churn Burn Before Spark
Sprint CEO Dan Hesse likens the carrier's situation to the that of the three little pigs: It's building a house of bricks while the others are building homes out of straw. It may be taking longer, but it'll be the only one that won't get blown away.
Only, in the meantime, Sprint Corp. (NYSE: S)'s customers are the ones getting huffy and puffy and running away.
Sprint's massive Network Vision project is causing it some short-term pain, but Hesse assured investors at a UBS conference Tuesday that there would be long-term gain. The third-largest carrier in the US lost a good chunk of customers when it switched off its iDEN network, but it's finding that it's continuing to bleed 3G and 4G customers as it works on repurposing that spectrum for LTE.
This is something it's confident will change with its Spark update, but it's going to take some time. Today Sprint announced it has completed updates for its faster Spark service in its first market, Chicago, and Hesse said the network, which combines 1900 MHz, 800 MHz, and 2.5GHz frequencies, is worth waiting for. (See: Sprint Sparks It in Chicago.)
"What's been difficult for me is all the progress we've made in customer experience both in gross adds and churn, that we have to go through this period of time with a headwind our competitors don’t have," Hesse said, adding, "That part is frustrating to me -- that we can't build the network faster, but once we have that piece behind us, look out."
Under Hesse's leadership, Sprint clawed its way from the bottom of the customer service rankings to the top, but has recently found itself slipped back at the bottom. Hesse said the network issues have also kept it from responding to competitive marketing and pricing changes, especially from T-Mobile US Inc. . Instead, it has to focus all its efforts on LTE. As a result, churn is at a high now, and he expects it to stay elevated until mid-2014, when things start turning around. (See: Sprint Slips Back in Customer Service.)
At that time, Hesse said Spark will reach 150 Million PoPs, and it will also have sped up past today's peak speeds of 50 to 60 Mbit/s thanks to its use of carrier aggregation. He said it will reach 150 Mbit/s in three years time. The carrier also plans to deploy 55,000 macro cell sites in total and then begin to augment them with small cells in the later part of 2014.
In Sprint's more advanced Network Vision markets, like Chicago where the work is complete, Hesse said customers are seeing improvements in dropped calls. When it started the transition, including ripping out its Motorola equipment to replace it with Samsung, churn immediately started to go up. Once the network got to about 70% complete, the improvements started to show through and churn came back down. That's the path he expects all the markets to follow.
"Churn gets worse as you begin to build Network Vision, but as you get to a certain point, it improves to a level much better than the starting point," Hesse said. "But there's a short-term pain. We have a number of quarters we're still doing a lot of building, so churn is being pressured."
— Sarah Reedy, Senior Editor, Light Reading