Sprint Nextel narrows subscriber loss in 4th quarter, revenue still declines

Sprint Nextel slows subscriber loss in 4th quarter

NEW YORK — Sprint Nextel Corp. managed to slow down the rate of subscriber loss in the fourth quarter, an encouraging sign for a wireless carrier that has lost millions of customers over the past few years.

Sprint, the third-largest U.S. wireless carrier, said Wednesday that it lost a net 148,000 subscribers during the last three months of 2009, far fewer than the 545,000 who fled in the third quarter.

However, much of the improvement came from the recruitment of lower-paying subscribers to prepaid services such as Boost Mobile, and that has been getting more difficult as competition increases.

Sprint shares fell 29 cents, or 8 percent, to $3.36 Wednesday.

Sprint reported a quarterly loss of $980 million, or 34 cents per share, for the last three months of 2009. That compares with a loss of $1.62 billion, or 57 cents per share, a year earlier.

Analysts were expecting a loss of 19 cents per share, but that figure did not include the effects of a noncash $306 million tax charge. Sprint did not provide a per-share figure comparable to the analyst estimate.

Revenue slipped 7 percent to $7.87 billion, slightly below the $8 billion expected by analysts surveyed by Thomson Reuters.

Sprint’s Boost Mobile and Virgin Mobile USA prepaid services added 435,000 customers during the quarter. The Sprint-branded service also reversed losses and added 3,000. Sprint CEO Dan Hesse credited that partly to big strides in improving customer service.

However, Nextel subscribers are still fleeing in large numbers. Sprint has struggled to keep them since it bought that network in 2005.

Also, Sprint added far fewer prepaid subscribers than it did earlier last year. Although it started attracting lots of customers last January with a heavily promoted $50-per-month unlimited-calling plan on Boost Mobile, competitors have struck back. MetroPCS Communications Inc. and Leap Wireless International Inc. have cut prices, and there’s even a $45-per-month plan for unlimited calling on Verizon Wireless’ network, sold under the Straight Talk brand.

Analyst Craig Moffett at Sanford Bernstein said the results in prepaid were disappointing, offsetting the progress in keeping traditional customers who sign long-term service contracts.

He compared Sprint’s progress in signing contract customers to that of “the student who studied furiously to turn around a string of bad grades in math.”

“They passed. But Mom isn’t going to be happy about what happened in English,” Moffett said, referring to Sprint’s performance in prepaid service.

On a conference call, Hesse said the company would re-energize its prepaid business with a strategy revamp in the second quarter, using a range of brands to appeal to different segments of the market. He expects overall subscriber numbers to keep improving this year.

Although prepaid service is helping turn around customer flight, it’s not necessarily a huge help for Sprint’s results. Prepaid service costs an average of $31 per month, compared with $55 for customers who agree to long-term service contracts. Sprint is also heavily subsidizing new handsets for contract-signing customers to compete with the two larger carriers, AT&T Inc. and Verizon Wireless, and its profit margins are much slimmer than theirs.

To curb costs, Sprint cut about 10,000 jobs last year, ending with 40,634 employees. It also transferred 6,000 workers to LM Ericsson AB, a Swedish contractor that took over management of Sprint’s network. Chief Financial Officer Bob Brust said he doesn’t expect more job cuts soon.

Sprint, which is based in Overland Park, Kan., ended the year with 48.1 million customers, down from 49.3 million the year before. That’s a little more than half of the 91.2 million served by market leader Verizon Wireless. It’s also far behind AT&T, with 85.1 million.

For the full year, Sprint lost $2.4 billion, or 84 cents per share, on $32.3 billion in revenue. That compares with a 2008 loss of $2.8 billion, or 98 cents per share, on $35.6 billion in revenue.