Sprint beats estimates even after 560,000 customers depart

April 24, 2013 04:18 AM

Sprint Nextel Corp., the third- largest U.S. wireless carrier, reported a narrower-than-expected first-quarter loss, even as 560,000 subscribers departed.

The first-quarter loss was 21 cents a share, Overland Park, Kansas-based Sprint said today in a statement. Analysts had predicted a loss of 34 cents on average, according to data compiled by Bloomberg. Sales rose less than 1 percent from a year earlier to $8.79 billion, compared with an average estimate of $8.74 billion.

Sprint, which is spending to build a faster long-term evolution network to retain more customers, sold 5 million smartphones, including 1.5 million of Apple Inc.’s iPhone. Though smartphone sales hurt profit in the short term because carriers subsidize them, the devices encourage subscribers to use more data, helping increase revenue in the long run.

“While Ebitda beat is nice to see, the contributing factor was the lower gross adds,” said Jennifer Fritzsche, an analyst at Wells Fargo & Co. in Chicago, in a research note. Ebitda is a measure of profit. “Sprint is trying to get its LTE ramped up before being aggressive with its marketing and focusing on share gain,” she said.

Sprint was little changed at $7.09 at 8:30 a.m. in New York. The shares have more than tripled in the past 12 months as the company found itself the target of a bidding war. Tokyo-based SoftBank Corp.’s agreement to pay $20 billion for a 70% stake was followed earlier this month by a $25.5 billion proposal from Dish Network Corp. Both deals aim to build Sprint into a bigger challenger to Verizon Wireless and AT&T Inc.

Improved Forecast

The company forecast 2013 operating profit to be at the high end of its previously stated range of $5.2 billion to $5.5 billion, before depreciation and amortization and excluding the closing of transactions.

The 560,000 contract customer defections compared with an expectation of 512,000, based on the average of eight analysts’ estimates compiled by Bloomberg.

Sprint’s first-quarter average phone bill for contract customers was $62.47, up from $61.47 in the fourth quarter. Analysts were expecting $62.54, according to the average of seven estimates.

Of the first-quarter iPhone customers, Sprint said 43% were new to the carrier, compared with 38% last quarter.

The operating profit margin of the wireless business, excluding costs such as depreciation and amortization, was 19.2% in the first quarter, up from 14.6% a year earlier. Analysts had estimated a margin of 14.7%.

Sprint’s first-quarter net loss narrowed to $643 million, or 21 cents a share, from $863 million, or 29 cents, a year earlier.


Bloomberg News


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