Sprint Nextel Corp. lost subscribers as 2012 came to an end, a trend that will continue into summer, the company said Thursday.
By MARK DAVIS
The Kansas City Star
According to the wireless phone company’s year-end report, Sprint ended December with 55.6 million customers, 337,000 fewer than at the start of the fourth quarter. During all of 2012, Sprint lost 605,000 subscribers.
Its customer count might have fallen more but for the 2.2 million iPhones Sprint sold in the quarter, with 38 percent of them going to new customers.
Both Verizon and AT&T added customers in the fourth quarter. As the No. 3 carrier, Sprint remains about half their size.
Financially, Overland Park-based Sprint lost $1.32 billion in the final three months of last year, in line with its losses a year ago and less than analysts had expected. It lost $4.3 billion in 2012, nearly 50 percent more than it lost in 2011.
Revenues, however, increased 3.2 percent to $9 billion in the fourth quarter, largely because the average bill for customers increased.
Sprint also ended December with $9 billion in cash and promises of more infusions from Tokyo-based SoftBank Corp. SoftBank has agreed to buy 70 percent of Sprint for $20 billion, confident that the two companies together can take on the larger U.S. carriers. SoftBank already has invested $3 billion in the company as part of the deal.
Sprint’s own outlook is buoyed by its heavy investments in an extensive upgrade of its wireless network. Those costs contributed to the net loss for the year and will continue to weigh on its financial statements early this year.
In an interview with The Star, chief executive Dan Hesse asked customers to “pardon our dust” as its Network Vision project rolls out in more cities.
Kansas City already has been through the upgrade to better voice coverage and faster data speeds for videos and downloads. But other cities will see a temporary increase in dropped calls or other conveniences as they switch over.
“Customers do feel that,” Hesse said.
Sprint’s customer count will feel other disruptions that collectively could strip about 3 million subscribers from its rolls by the end of June.
Some of the losses will be offset by new customers Sprint attracts the first half of 2013.
Many of the losses will come from Sprint’s outdated Nextel network, which dates to its 2005 merger with Nextel Partners. The Nextel subscribers have to find a new home by mid-year when Sprint will unplug the old network.
About half the Nextel customers who moved in the fourth quarter stayed with Sprint.
Despite a marketing push, executives expect to lose more than 1 million of the 1.63 million remaining Nextel customers who buy service under contracts. Chief financial officer Joe Euteneuer said that those losses would leave Sprint with fewer customers under contract by mid-year.
“We have managed it in a way that has preserved revenue,” Euteneuer said about the migration of Nextel customers.
With its focus on the shifting Nextel customers, Sprint ended 2012 with a falling customer count after having added more than 1 million subscribers in the first three months of 2012.
Sprint also expects losses this spring among customers who buy service month-to-month.
Sprint also is asking its investors to be patient as its financial results will feel the effect of $4 billion in network investments and related costs during the first half of 2013.
These capital improvements added to the fourth quarter loss of $1.32 billion, or 44 cents a share. A year ago, Sprint lost $1.3 billion, or 43 cents a share, in the fourth quarter.
Sprint shares lost 3 cents Thursday, closing at $5.74 after the company’s report.
Funding provided by SoftBank is allowing Sprint to invest heavily in upgrading its wireless network and attract customers with subsidies for smartphones.
Hesse said some of the added spending was making up for network upgrade activity that had been planned for late 2012. Some of that was due to Hurricane Sandy, which kept workers away from Sprint sites in the storm zone and drew crews to do recovery work throughout the area afterward.
He said the storm “probably cost us about a month” on the network upgrade schedule.
Sprint also is using its fat checking account to speed up its network upgrade. Its original schedule set a pace that Sprint would be able to finance on its own.
Hesse said the funding from SoftBank was allowing work to go more quickly in areas where speed won’t increase the cost.
“We’re not going to let the money burn a hole in our pocket,” he added.
Some of that funding won’t arrive until Sprint and SoftBank complete their $20 billion deal around mid-year. Sprint also is hoping by mid-year to buy the half of Clearwire Corp., its network partner, that it doesn’t already own.
And at that point, consumers might start seeing and hearing more from Sprint.
Hesse said the company’s marketing resources now aimed at the Nextel customers will refocus on cellphone shoppers elsewhere.
It was losing that battle with other carriers late last year, notably for customers who buy service under a contract. Those accounts generate more revenue for the companies than month-to-month buyers.
Sprint said its subscriber losses in the fourth quarter included 243,000 contract customers. Verizon added 2.1 million contract customers and AT&T added 780,000.
To reach Mark Davis, call 816-234-4372 or send email to firstname.lastname@example.org.