Earnings Preview: Sprint tantalizingly close to stabilizing subscriber numbers

Earnings Preview: Sprint to report 2Q results,0351

NEW YORK — Sprint Nextel Corp., the third-largest wireless carrier in the U.S., reports its second-quarter results before the stock market opens Wednesday.

WHAT TO WATCH FOR: Sprint is something of the “sick man” of wireless, and hasn’t posted a profit since the middle of 2007. It hasn’t posted a subscriber increase since then either.

However, it’s come closer to stabilizing its total subscriber numbers recently, helped by improvements in customer service. Last quarter, it lost only 75,000.

It’s now within striking distance of posting a net subscriber gain, which would be a milestone. But the pool of people who have credit good enough for two-year contracts, but don’t already have phones has largely dried up. This means that carriers are mostly stealing new contract subscribers from each other, and both AT&T Inc. and Verizon Wireless have already posted relatively good contract subscriber numbers for the quarter, so things don’t look good for Sprint.

In any case, most of Sprint’s recovery in subscriber numbers has come from customers who don’t sign contracts, but prepay for service monthly. They pay less every month, but growth prospects are better in this business, even though competition is tough. During the quarter, Sprint revamped its prepaid offerings to go after different customer segments, and investors will get an early read on how this strategy is doing.

WHY IT MATTERS: Sprint has 48.1 million wireless subscribers, and its struggle to keep them affects pricing on other carriers. Sprint also owns most of Clearwire Corp., which is building a nationwide wireless broadband network. Sprint’s funding of that project is crucial to its continuation, though Clearwire has been getting some funding from cable companies as well as from Google Inc. and Intel Corp.

WHAT’S EXPECTED: Analysts surveyed by Thomson Reuters expect Sprint to report a loss of 20 cents per share in the second quarter on sales of $8.0 billion.

LAST YEAR’S QUARTER: Sprint reported a loss of 13 cents per share on revenue of $8.14 billion.