IHS Global Insight Perspective | |
Significance | Sprint has reported a strong Q1, boosted by strong performances in both the prepaid and postpaid retail segments |
Implications | Sprint has managed to remain competitive in the postpaid, despite the introduction of a USD10 data surcharge and Verizon introducing the iPhone since the start of the year |
Outlook | Data services remain the key, with Sprint continuing its network-transformation programme, Network Vision, and planning to announce its long-term 4G strategy by mid-year |
Sprint continued strongly in Q1 from the previous quarter (see United States: 11 February 2011: Contract Subscriber Growth Helps to Drive Up Sprint's Q4 Revenue by 5.5%), with revenues up 3% year-on-year (y/y) to just over USD8.3 billion; OIDBA was 2% y/y at just over USD1.5 billion, with the Q1 figure being the highest sequential percentage growth in over five years. Net loss also decreased 48% y/y to USD439 million.
Sprint also reports its best net additions figure in five years, its best ever postpaid churn, with the best y/y improvement in five years and the last four quarters being the four best quarters, its best ever prepaid net additions with its best churn rate in five years, its largest sequential improvement in postpaid ARPU in over five years, and its largest sequential improvement in wireless service revenue in four and a half years, with a figure of USD6.6 billion; other operational figures and their comparison from a year ago can be found in the table below.
Sprint Nextel Performance | |||
Q1 2010 | Q1 2011 | ||
Retail Post-Paid |
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ARPU | USD | 55.00 | 56.00 |
Churn | % | 2.15 | 1.81 |
Net Additions | '000 | -578.00 | -114.00 |
End of Period Subscribers | '000 | 33,389.00 | 32,998.00 |
Retail Pre-Paid |
| ||
ARPU | USD | 27.00 | 28.00 |
Churn | % | 5.74 | 4.36 |
Net Additions | '000 | 348.00 | 846.00 |
End of Period Subscribers | '000 | 11,036.00 | 13.123.00 |
Wholesale and Affiliate |
| ||
Net Additions | '000 | 155.00 | 389.00 |
End of Period Subscribers | '000 | 3,633.00 | 4,910.00 |
Total |
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Net Additions | '000 | -75.00 | 1,121.00 |
End of Period Subscribers | '000 | 48,058.00 | 51,031.00 |
% Retail Post-Paid | % | 69.48 | 64.66 |
% Retail Pre-Paid | % | 22.96 | 25.72 |
% Wholesale and Affiliate | % | 7.56 | 9.62 |
Source: Sprint Nextel and IHS Global Insight | |||
Outlook and Implications
- Strong operational performance: Sprint reported a strong operational quarter in Q1, and this despite the launch of the iPhone by Verizon (see United States: 22 April 2011: Verizon Sees Growth in Q1 Thanks to Increasing Wireless Revenues). Sprint managed to attract over a million new customers in the quarter, thanks to the success of its multi-brand strategy, with the prepaid segment boosted by the strong performances of its brands Virgin Mobile and Boost Mobile, while the postpaid segment saw a strong performance of the Sprint brand itself, which added over 310,000 subscriptions, but the overall figure was negatively impacted by losses from its iDEN network. The postpaid performance was especially notable, firstly as it came in a strong competitive environment with both AT&T and Verizon, with latter finally launching the iPhone and the former offering the 3GS version for USD49, with Sprint admitting it had some impact on its net additions this quarter; and secondly despite the USD10 charge added this quarter, for customers upgrading or accessing data services on their device, which boosted ARPU and still saw 9% of Sprint's postpaid customers upgrading their handset. Smartphones represented 73% of sales this quarter, with the introduction of third 4G phone the HTC EVO Shift 4G, with 54% of the postpaid base owning a smartphone thanks to a clear focus on Android devices. This emphasis on smartphones and an expanding handset portfolio, as well as growing customer satisfaction, made a clear impact in lowering Sprint’s churn rate, both on the prepaid and postpaid side, with some of the lowest figures ever being reported by the operator.
- Network Vision and 4G Strategy: The company gave an update on its Network Vision plan, first announced in December 2010, and whose aim is to combine multiple technologies in multiple bands within one base station, giving the operator some flexibility; the plan also aims to phase out Sprint's iDEN network. Alcatel-Lucent, Ericsson and Samsung has been selected to carry out the plan, and Sprint announced that initial deployment would take place in Q411, costing between USD200 and USD250 million; Sprint also announced it would it would give its long-term 4G strategy by mid-year. With the dispute with Clearwire settled (see United States:20 April 2011: Sprint, Clearwire Agree New USD1-Bil 4G Wholesale Agreement), that strategy has become clearer recently, but it will be interesting to see whether Sprint sticks to WiMAX in the long-term or switches to LTE, and whether Sprint might become interest in further spectrum bands to deploy 4G services, as it currently holds spectrum in the 800, 1600, 1900 and 2500MHz frequency bands, but nothing in the 700MHz or AWS bands. And lastly, whether or not Sprint decides that network hosting is a feasible option to gain extra revenue, as it has been reported (see United States: 19 April 2011: Sprint Enters Into Talks with Clearwire and LightSquared—Report).
- The Proposed AT&T Merger: Finally, Sprint gave another argument in its opposition to the proposed merger between AT&T and T-Mobile USA, following its claims that the duopoly between AT&T and Verizon would negatively affect competition, and lead to higher prices for consumers, and that the FCC should take a look at AT&T's proposed spectrum acquisition a single proceeding (see United States: 30 March 2011: Sprint Formally Files Anti-Competition Complaint Against AT&T—T-Mobile Deal and United States: 28 April 2011: Sprint Leads FCC Joint Filing Against AT&T/T-Mobile Merger). This time Sprint gave more colour to its argument that the deal would stifle innovation within the US wireless space, taking for example the role it took in helping the US gain 4G technology leadership thanks to its own 4G launch, which led both Verizon and AT&T to bring forward their plans for their own 4G services.