Sprint broke its own records for new subscribers and revenue per user, but still lost $1.3 billion in the fourth quarter, thanks in part to iPhone subsidies.
Apple iPad: Happy 2nd Birthday
(click image for larger view and for slideshow)
Sprint can't seem to catch a break. The nation's third-largest wireless network operator added a record 1.6 million net customers during the fourth quarter and ramped up average revenue per user (ARPU) by $3.69.
The fourth quarter of 2011 also marks the first time Sprint offered the Apple iPhone, and it sold 1.8 million of them. The high cost to subsidize the iPhone, however, contributed to Sprint's $1.3 billion shortfall.
At the end of the year, Sprint had more than 55 million customers. Only 60% of them--or 33 million--are the lucrative post-paid type of customer. That figure includes 28.7 million proper Sprint customers and 4.3 million Nextel customers. The rest of Sprint's customer base comes from its prepaid operations (think Virgin Mobile USA and Boost Mobile) to the tune of 14.8 million, and finally 7.2 million wholesale customers.
Sprint's net customer additions came from 668,000 new retail subscribers and 954,000 new wholesale customers. In other words, 60% of its new customers came from third-party resellers. That's rather lopsided. Of note, Sprint lost another 378,000 post-paid Nextel subscribers during the fourth quarter. This is one issue that's hurting Sprint. As it transitions away from the iDEN network, assumed in its Nextel acquisition, it has been bleeding profitable Nextel customers.
Sprint's wireless business raked in $6.9 billion in quarterly revenue, which was up compared to the previous quarter and the year-ago quarter. The quarterly year-over-year improvement was primarily due to higher postpaid ARPU as well as an increased number of net prepaid subscribers as a result of additional market launches. Wireless postpaid ARPU increased year-over-year from $55.26 to $58.59, the largest year-over-year postpaid ARPU growth in the company's history.
Total wireless net operating expenses were $8.4 billion in the fourth quarter, compared to $7.6 billion in the year-ago period and $7.4 billion in the third quarter of 2011. iPhone subsidies really killed Sprint's margins for the quarter. It spent $1.7 billion in equipment subsidies (it brought in $910 million in device sales, but spent $2.6 billion subsidizing those devices). The increase in net subsidy is primarily due to the launch of the iPhone 4 and iPhone 4S, which on average carry a higher subsidy rate per handset as compared to other handsets.
Sprint also blamed its Network Vision project for a chunk of its quarterly loss. Sprint is in the middle of reorganizing its network business. In phasing out its iDEN network, it's trying to convince its Nextel customers to jump to its CDMA services instead. It plans to re-purpose the 800-MHz spectrum used by the iDEN network to add voice capacity for its 3G customers.
It is also undergoing a costly switch in 4G strategies. Sprint was early to offer 4G services in the form of WiMax. Sprint's bet on WiMax was a bad one, however, and the company is now transitioning from WiMax to LTE 4G, which is what AT&T and Verizon Wireless are using for 4G technologies. The cost to maintain existing services for its customers while it adjusts its network infrastructure to new technologies are sure to weigh Sprint down for many quarters to come.
In this all-day Information & Technology virtual event, The Future of Multi-Channel Distribution, top business technologists, experts, and solution providers will discuss strategies, essential technologies and evolving regulator/legal issues around the next generation of multi-channel distribution best practices. When you register, you will gain access to live webcast presentations and virtual booths packed with free resources. (Free registration required.)
InformationWeek Elite 100Our data shows these innovators using digital technology in two key areas: providing better products and cutting costs. Almost half of them expect to introduce a new IT-led product this year, and 46% are using technology to make business processes more efficient.
The UC Infrastructure TrapWorries about subpar networks tanking unified communications programs could be valid: Thirty-one percent of respondents have rolled capabilities out to less than 10% of users vs. 21% delivering UC to 76% or more. Is low uptake a result of strained infrastructures delivering poor performance?
Join us for a roundup of the top stories on InformationWeek.com for the week of December 14, 2014. Be here for the show and for the incredible Friday Afternoon Conversation that runs beside the program.