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

Sarah Thomas 12/12/2013 | 11:57:45 AM
Re: Network wars Yeah, getting the next iPhone would be huge. As far as Androids go though, isn't the Galaxy S 4 one of the best? Letting people out of contracts to upgrade to Spark phones would be good marketing of the network.
DanJones 12/12/2013 | 11:53:22 AM
Re: Network wars That's going to be the issue for Sprint really, can they get enough device support with gadgets that people want to upgrade to even if they don't understand the underlying network upgrades.
Sarah Thomas 12/12/2013 | 11:23:09 AM
Re: higher prices = fewer customers It's initial Spark phones are the pretty standard $200 on contract, including the new Samsung Galaxy S4. It hasn't talked much about the pricing for the network, but as far as I know, it's the same as its other services. It would be ill-advised to bump up prices on it. More likely, I could see its unlimited offer going away, but I think Sprint is going to hold on to that as long as it can.
Sarah Thomas 12/12/2013 | 11:20:48 AM
Re: Network wars I can only think of one person who is still on Sprint in Chicago, and he wasn't even aware of Spark. But, he has the iPhone 5 and probably won't be switching to an Android for it anytime soon.
tmc8080 12/11/2013 | 8:40:39 PM
higher prices = fewer customers In all likelihood Sprint customers will have to $$ PAY $$ for new phones, and higher prices for service.. this ends up being less than a zero-sum game. What does it matter if Sprint ends up with a Verizon-esque network if they charge AT or ABOVE Verizon prices?!? Who cares, by then... Sprint still needs to triple it's geography in towers before it can claim to have Verizon geographical coverage.. how's that going again without the help of domestic fiber back-haul (much of which has AT&T, Verizon, Comcast and various level-1 internet companies as gate-keepers)??

Sprint as it is- trying to shun subscribers away from it's MVNO brands that have cheaper service. They are also degrading the QOS with unlimited service offers-- that is if they actually still offer it at all. YMMV, since some heavy usage customers they leave alone for one reason or another according to forums. To be fair, this could happen with any of the carriers including verion, at&t, and tmobile too.

DanJones 12/11/2013 | 5:18:02 PM
Re: Network wars Plus how well the handoff works on Spark.


Any Chicago readers out there have any experience of the new network?
Sarah Thomas 12/11/2013 | 12:08:42 PM
Re: Network wars Agreed, Mark, although I don't think cash will be a big problem for Sprint given Softbank's backing. It's biggest issue right now is customer retention. It can't do that without a solid network. Next year will be key.
MarkC73 12/11/2013 | 1:52:20 AM
Re: Network wars Unfortunately, the bottom line is the bottom line. 

Eventually, you'll need revenues in order to keep building, so let's hope their new business partner funding will provide something that gives them a bit of differential, because if it doesn't, they'll be in trouble, again.  Sprint, has tried the 'from the ground up' scheme before.  Three things come to mind to that, one) what do customers actually get in terms of benefits (live data), two) Sprint still has to have some margins while building out this network (can it execute?), and three) Verizon and ATT don't sleep.
Sarah Thomas 12/10/2013 | 5:57:41 PM
Network wars Hesse made a cute analogy with the three little pigs, and it gave me a reason to use a picture of them on the story...but I don't think AT&T and Verizon (and T-Mobile) are exactly building their networks out of straw and hay. They're improving just as Sprint is, with Verizon and T-Mobile moving ahead on 20x20MHz LTE. It'll be interesting to see if Sprint's tri-mode + HD voice is really all that superior to its competitors.
Sarah Thomas 12/10/2013 | 5:52:19 PM
Will Sprint's customers return? So the big question is if those customers it has lost will come back once Spark is in their areas. We are a fickle bunch, but two-year contracts and ETF means those that have left will remain gone for at least a year or two.
Sign In