Sprint Sticks With Unlimited Data Plans
"Right now we have no plans to go to tiered data pricing... I’m not excluding it as a future possibility, but we see no need to do so currently," Hesse said on the call.
The question came up as analysts asked about the the High Tech Computer Corp. (HTC) (Taiwan: 2498) EVO 4G, Sprint's flagship handset that supports both 3G and WiMax, and whether Sprint might have to change pricing for such devices in the future. Sprint will be launching its second dual-mode smartphone, from Samsung Corp. , later this year.
"EVO customers are using about three and a half times the data of our regular smartphone customers," Hesse said. Nonetheless, he said that handling such traffic is cheaper for Sprint on the Clearwire LLC (Nasdaq: CLWR) WiMax network that the company is using for its "4G" service and noted that EVO customers pay $10 extra for the high-speed service. That typically means that customers are paying $80 rather than $70 for unlimited voice and data with the EVO.
Sprint still isn't giving numbers for the EVO sales but said the phone sold well in the quarter despite shortages from HTC. "We could sell a lot more of them than we have," says Hesse, who added that the vendor is trying to fix supply issues now.
Overall, "4G is increasingly important" for Sprint, hence a number of questions about the operator's relationship with its partner and WiMax provider, Clearwire, during the call. Analysts alighted on market chatter about how the fledgling operator would get more funding and whether major stakeholder Spring will put more money in.
"We are supportive of Clearwire’s 2010 network buildout plan," Hesse said. The operator plans to cover 120 million people in the US with its WiMax network by the end of this year.
The CEO wouldn't be drawn much further on Sprint's thinking on Clearwire right now. "Between the strategic investors and the Clearwire board we will do what we think is in the best interest of Clearwire," Hesse said.
Sprint's CFO Robert Brust made it clear on the call, however, that Sprint has headroom to invest more in Clearwire next year if it wants to. "We have free and clear cash flow for 11 months next year," Brust noted.
Hesse also noted that Sprint has options for next-generation upgrades and has a "multi-modal network RFP" out now. "Sprint, with WiMax partner Clearwire, has enough spectrum to offer both WiMax and LTE and while there would be costs associated with an LTE overlay, it would not be prohibitive to do so," writes Technology Business Research Inc. (TBR) analyst Kate Price in a research note.
Signs of a turnaround? This planning for the future comes amidst some signs of a possible turnaround at Sprint. The company posted its first subscriber growth for three years today, even as its net revenue loss for the quarter widened.
The company added 111,000 net subscribers in the quarter, compared to a loss of 257,000 in the same quarter last year. The company, however, is still losing monthly bill-paying subscribers, albeit at a slower rate. It reports net postpaid subscriber losses of 228,000, both a year-over-year and a sequential improvement, as the company lost 763,000 fewer subscribers than in the second quarter of 2009 and lost 350,000 fewer subscribers than in the first quarter of 2010.
The company is expecting to add more wireless subscribers over the year and reduce the number of contract users that leave. "There are fewer net adds out there, so you have to look at porting trends between carriers," notes CFO Brust.
Sprint's overall quarterly loss was $760 million, or $0.25 a share, compared to a loss of $385 million, or $0.13 cents per share, in the second quarter of 2009. Sprint said that without a one-time $302 million tax deferral, it would have lost $0.15 a share. Net operating revenues fell 1.4 percent to $8.03 billion. Retail wireless service revenues of $6.4 billion for the quarter increased by less than 1 percent, compared to the second quarter of 2009, and decreased by less than 1 percent compared to the first quarter of 2010.
Wireless monthly contract average revenue per user (ARPU) of approximately $55 for the quarter declined year-over-year from $56, but remained flat compared to the previous quarter. Pay-as-you-go users contributed ARPU of approximately $28, compared to $34 in the year-ago period and $27 in the first quarter of 2010. Sprint doesn't split out separate data ARPU.
— Dan Jones, Site Editor, Light Reading Mobile