Sprint adding customers but profits remain elusive

Sprint adds postpaid subscribers for first time since 2007

Sprint is still having difficulty shedding its status as the sick man of the wireless industry.

Sprint's Kyocera Echo meets initial skepticism

First, the good news: For the first time since the second quarter of 2007, Sprint recorded a net plus in postpaid subscribers, as it added 58,000 to its postpaid rolls in the fourth quarter of 2010. The carrier also added 1.1 million wireless subscribers in all, although nearly half of those were prepaid wireless customers. This is important for Sprint because postpaid subscribers typically deliver average revenue per user (ARPU) nearly two times as large as prepaid subscribers. Last quarter, for instance, Sprint generated ARPU of $55 for postpaid subscribers and only $28 for prepaid subscribers.

The carrier's ability to add subscribers is still haunted by problems facing the iDEN network it acquired when it Nextel in 2005. Last quarter, for instance, Sprint recorded losses of 395,000 postpaid iDEN subscribers and 768,000 prepaid iDEN subscribers. These losses both offset the significant gains made by Sprint's CDMA network last quarter in both the postpaid market (453,000 net additions) and the prepaid market (1.4 million net additions).

The good news from this perspective is that Sprint is planning to phase out its iDEN network altogether in 2013, so the network's days of being an albatross for the carrier are limited. Even if Sprint weren't planning to phase out its iDEN network, it may have simply run out of iDEN customers by 2013 no matter what, as the carrier has lost nearly 4 million iDEN subscribers over the past two years alone.

And the fact that Sprint is adding wireless subscriptions at all comes as a relief to a company that lost more than 5 million wireless subscribers between 2007 and 2010. At its lowest point in the third quarter of 2008, Sprint lost a whopping 1.3 million wireless subscribers, and for all of 2008 Sprint lost more than 4 million wireless subscribers.

Even so, the encouraging signs for Sprint on the customer additions side are still not reflected in its bottom line, which remained deep in the red in 2010. On the year, Sprint posted an after-tax net loss of $3.46 billion, which was actually 42% greater than the $2.44 billion after-tax net loss the company posted in 2009. The biggest expense increase for Sprint last year was in the cost of products, which rose from $5.5 billion in 2009 to nearly $7 billion in 2010.

The recent rise in Sprint subscribers has coincided with a rebound in Sprint customer satisfaction, according to the American Customer Satisfaction Index published this past spring. Sprint last year surged forward to its highest score in the survey's history, just two years removed from scoring its lowest-ever rating on the index. The ACSI, which is published quarterly by the University of Michigan's Ross School of Business, found that Sprint's wireless service customer satisfaction ratings rose to an all-time high score of 70 on a 100-point scale. In 2008, Sprint's customer satisfaction rating had crashed to a score of 56, making it far and away the lowest-rated carrier in the United States.

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