Sprint gains high-value phone subscribers for the first time in two years

This past summer marked an inflection point in Sprint’s long turnaround, chief executive Marcelo Claure declared Tuesday. It stopped bleeding customers.

Not just any customers, but high-value phone connections from customers with good credit and bigger bills.

Beginning in May and running through October, the Overland Park-based company has turned that number around. Specifically, Sprint grew this important customer base by 237,000 higher-bill-paying phone connections to the Sprint network during the third quarter of 2015. Many of them were already Sprint customers on low-cost plans. It’s the first time Sprint has grown this important customer number in more than two years.

“I would say mission accomplished in (the effort to) stop losing customers,” Claure told The Star after a session with Wall Street analysts. “We have turned the corner from Sprint losing hundreds of thousands of handset customers.”

In total, Sprint’s subscriber count rose by 910,000 in the third quarter and reached 58.578 million at the end of September. It remains the No. 4 carrier behind T-Mobile US, which reported 61.2 million.

Investors had expected an increase, but they also were looking for more details on how Sprint management plans to reach its next milestones — cutting costs by $2.5 billion and financing its business. Sprint shares on Tuesday fell 7 percent, or 34 cents, to $4.51.

Sprint has said the spending cuts will include layoffs, but it hasn’t said how many. Exactly one year ago Tuesday, Claure announced plans to lay off 2,000 employees in the wake of 1,700 other job cuts last fall.

Claure said he doesn’t have a layoff total for the latest round and acknowledged that employees are on edge waiting for word of who has jobs and who doesn’t.

“I don’t blame them. Nobody likes to be in that situation,” Claure said. “We are going to try to do this fast. I want to do this before Jan. 30.”

Under changes Sprint made recently, employees notified of their layoff after Jan. 30 will receive roughly half the severance benefits of those notified before that date. Claure said it would be “unfair” to wait until then to notify employees.

Sprint updated its effort to set up financing to help it preserve its cash while leasing millions of phones to customers. Each lease requires Sprint to put up cash for the phone, and it takes months to recover that money from customers’ bills.

Three months ago, the company announced plans to set up a lease financing deal with its parent company, Tokyo-based SoftBank Corp., and others.

Chief financial officer Tarek Robbiati, during his first conference call with analysts, said terms on the lease financing deal were set. But the documents are complex and still being completed, he said.

It was not enough for analyst Craig Moffett, who has been skeptical of Sprint’s plans to fix its cash drain.

“We had expected an announcement (of a completed deal) today,” he wrote in a note to clients of MoffettNathanson Research. “Twelve weeks ago we were ‘days away.’ Today’s release promises the leasing vehicle within ‘the next few weeks.’”

Jennifer Fritzsche of Wells Fargo Securities, who has been more optimistic about Sprint’s future, similarly noted the lack of details during the conference call.

“The call was not well received obviously,” she wrote clients. “Unfortunately, we were hopeful for more answers.”

Financially, Sprint posted a smaller net loss during the quarter than it did a year ago. Its loss of $585 million, or 15 cents a share, compared with a loss of $765 million, or 19 cents a share, a year earlier. The report covers the company’s second quarter, with its fiscal year beginning April 1 each year.

Revenues were down 6 percent from a year ago at $8 billion. Claure attributed that to the long line of months during which Sprint lost high-value phone subscribers. He also said revenues have stabilized with the growth of high-value customers.

The company’s recent addition of high-value customers included 199,000 that had already been Sprint subscribers on low-cost prepaid plans with Sprint’s Boost and Virgin brands. These customers were invited to switch over to the higher-cost Sprint brand in what Claure called a test.

Prepaid customers have to pay for service each month before using it, largely because they tend to have lower credit scores than “postpaid” subscribers who qualify for credit by using service and then paying.

Claure said that if the switched customers work out well for Sprint, the company may expand the effort.

Sprint this week became the first U.S.-based wireless company to sign a roaming agreement with the Telecommunications Company of Cuba. It will make visits to the island nation more convenient for Sprint customers.

Sprint also boosted its high-value customer count by slowing the rate at which its existing high-value customers left for other carriers.

The loss of subscribers, called churn, fell to a record low 1.54 percent in July, August and September.

This story was originally published November 3, 2015 at 7:26 AM with the headline "Sprint gains high-value phone subscribers for the first time in two years."