Sprint gains 777,000 prepaid subscribers, but overall subscriptions still falling

Company loses nearly 1 million postpaid customers in 2Q 2009

Sprint added 777,000 prepaid wireless subscribers to its ranks in 2Q, but suffered a net loss of 257,000 wireless subscribers for the quarter.

If nothing else, Sprint is doing well to corner the market for prepaid wireless plans.

In its second-quarter earnings report released Wednesday, Sprint revealed that it added 777,000 prepaid wireless subscribers to its ranks in 2Q 2009, bringing its total number of prepaid wireless subscribers to more than 5 million. However, the company's prepaid gains were once again more than offset by the continued drop in its postpaid wireless subscriber base, as the company lost 991,000 postpaid subscribers over the second quarter of 2009.

The loss in postpaid subscribers, as well as the loss of 43,000 wholesale wireless subscribers, gave Sprint a net loss of 257,000 wireless subscribers for the quarter. The carrier has lost a total of 901,000 wireless subscribers since last year and its current wireless subscriber base of 48.8 million places it third among U.S. wireless carriers.

Sprint has been aggressively promoting its prepaid wireless plans during the current economic recession as a way for consumers to get wireless minutes more affordably than they would from traditional postpaid plans. The company has added 1.45 million prepaid wireless customers to its ranks so far this year and its prepaid wireless business is expected to get a further boost now that the company has purchased Virgin Mobile USA, a subsidiary of the U.K.-based entertainment and communications giant that has more than 5 million prepaid wireless subscribers in the United States.

However, even if Sprint's prepaid wireless business is booming, it won't help Sprint financially unless its postpaid numbers start to improve. The average revenue per user (ARPU) for Sprint's prepaid plans for the second quarter was $34, while its ARPU for postpaid plans was $56. And in addition to providing less average revenue per subscriber, prepaid plans also provide more unstable income for carriers, as the churn rate for Sprint's prepaid plans was 6.38% in 2Q 2009 compared to a 2.03% churn rate for postpaid plans.

In terms of its overall finances this past quarter, Sprint posted a net loss of $384 million, or roughly 11% greater than the $344 million loss the company posted in 2Q 2008. The carrier so far this year has lost nearly $1 billion as its operating revenues have fallen to $5.4 billion, an 8% drop from the $5.9 billion in operating revenues that the company posted in the first half of 2008.

Sprint CEO Dan Hesse emphasized the positive for the quarter, noting the successful launch of the Palm Pre and improvements in the company's customer satisfaction. Even so, Hesse acknowledged the company's difficulties and said that he was "not satisfied that we lost a quarter of a million customers in the quarter."

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