Sprint will add 1,750 stores in deal with RadioShack

Sprint Corp., battling to gain high-value customers and bolster its tarnished brand, struck a deal Thursday to add 1,750 retail stores to its network.

The deal — boosting by half the company’s retail footprint — emerged from a bankruptcy filing Thursday by RadioShack and involves the retailer’s largest stockholder, Standard General LP, which plans to buy the stores.

Both companies would operate in the stores, but Sprint’s name would be on the front and its employees would sell the company’s wireless service in about a third of each store’s available space.

The rest of the store would carry RadioShack products, Sprint said in a statement, on the same day it released its quarterly earnings. Other wireless carriers’ products would no longer be available at the stores.

“Under terms of the agreement, Sprint would effectively operate a store within a RadioShack store,” the statement said. “The stores would be co-branded with Sprint being the primary brand on storefronts and in marketing materials.”

Sprint chief executive Marcelo Claure said in the statement that the companies would benefit from marketing to each other’s customers. He also called the deal a quick and cost-effective path to expand Sprint’s store count in “prime locations.”

The deal requires approval by the bankruptcy court in Delaware. The financial terms of the deal were not disclosed.

Overland Park-based Sprint owns 1,100 stores and has dealers that expand the current footprint to about 3,100 locations. A year ago, the company said it would close an unreported number of less-profitable stores and idle about 300 to 500 employees.

Sprint said Thursday it would need to hire an undetermined number of employees to help staff the new stores from the RadioShack agreement.

Claure had declined previously to comment on recent reports that Sprint had a deal involving RadioShack stores. But he had said that expanding the company’s store count was a priority this year.

“You got to have places where customers can go and shop for mobile phones and connected devices,” Claure said Thursday morning during a conference call with analysts after the company released its quarterly financial results. “Today, we are the carrier with the smaller amount of stores.”

That would be nearly 3,000 fewer stores than industry leader Verizon, about 2,000 fewer than AT&T, and several hundred fewer than T-Mobile, according to Claure’s rough tallies.

“If you’ve got a great offer you got to make it easy for your customers to go and get it,” Claure said. “Store growth is very important for us.”

For RadioShack, the deal adds some life to its plan to emerge from bankruptcy. The 94-year-old consumer electronics chain, with more than 4,000 stores, has struggled against larger retailers Amazon and Wal-Mart as well as a decline in the market for consumer electronics.

Standard General, through a subsidiary, is buying up to 2,400 stores including the 1,750 in which Sprint will be a co-tenant. RadioShack will close the remaining stores under a deal with a liquidator, Hilco Merchant Resources. RadioShack employs about 21,000 people, full and part time.

Earlier Thursday, Sprint reported a $2.38 billion loss during the final three months of 2014. The loss mostly recognized the diminished value of the Sprint trade name or brand, whittled down by an exodus of about 2 million of the company’s most valuable customers during the year.

With 55.9 million network connections at the end of December, Sprint showed an increase of 890,000 subscribers from three months earlier.

But those gains have come from low-revenue connections such as tablets, rather than phones, and wholesale subscriptions through Tracfone and other resellers that use Sprint’s network to sell service under their own brands. Sprint lost 205,000 high-paying Sprint phone customers during the quarter.

The increase in total connections allows Sprint to continue its claim as the third-largest U.S. wireless company, topping the 55 million subscribers at rival T-Mobile US Inc. T-Mobile has been adding subscribers at an aggressive pace for more than a year and substantially closed the gap between the carriers.

An aggressive marketing promotion late in the year helped Sprint entice many high-value Verizon and AT&T customers to switch to Sprint.

But Sprint lost far more of the high-value customers it already had, with December’s count showing 205,000 fewer than at the end of September. That loss came on top of the 1.8 million high-value customers Sprint shed during the first nine months of 2014.

Analyst Craig Moffett, of MoffettNathanson Research, said the mix of subscriber trends demonstrated “the problem with offering a better deal to new customers than existing ones; churn spiked higher.”

Churn is the industry’s measure of how many existing customers depart. Sprint said its churn among high-value customers was 2.3 percent in the fourth quarter. Claure promised a lower churn in the first three months of this year.

Sprint’s financial loss reported Thursday included a $1.9 billion drop in the value of the Sprint trade name. The drop increased the company’s reported net loss, though no cash drained from the company as a result.

A year ago, Sprint reported a net loss of $1.038 billion, or 26 cents a share, in the final three months of 2013. Its recent loss equaled 60 cents a share.

Revenues totaled $8.97 billion in the recent quarter, down from $9.14 billion a year earlier.

Shares of Sprint gained 24 cents, or 5.2 percent, Thursday but remain 43.3 percent lower than a year ago.

The report covers the third quarter of Sprint’s fiscal year, which it changed to end March 31 at the same time as the fiscal year of its parent company. Tokyo-based SoftBank Corp. owns 80 percent of Sprint.

Bloomberg News contributed to this article.

This story was originally published February 5, 2015 at 7:08 AM with the headline "Sprint will add 1,750 stores in deal with RadioShack."