Earnings: Sprint Nextel Revenues Hit Again By Wireless Unit
By Dianne See Morrison - Mon 12 May 2008 05:57 AM PST
Sprint (NYSE: S) Nextel reported Q1 net operating revenues of $9.3 billion, down 8 percent from the $10.1 billion reported in the first quarter of 2007, and a 5 percent decline compared to $9.8 billion in the fourth quarter. The US’s third largest carrier blamed its wireless unit for dragging it down, as subscribers continue to abandon the network—1.09 million left the network in the quarter, with 1.07 being the more valuable post-paid subscribers. With those who did stay, ARPU rates were down. Wireless post-paid ARPU in the quarter was “a little under $56”, a 6 percent decline compared to the year-ago period and a 4 percent sequential decline. Wireline revenues, meanwhile, were flat at $1.6 billion, a 2 percent increase from the first quarter of 2007 and a 1 percent increase from the fourth quarter.
Additional highlights:
— The wireless business now has 52.8 million total subscribers at the end of the period, compared to 53.6 million at the end of the first quarter of 2007. This breaks down to 39.7 million post-paid subscribers, 4.4 million prepaid and 8.7 million wholesale and affiliate users.
— Post-paid ARPU was hit by subscriber migrations to lower-priced plans, as well as increased customer “concessions” to retain them. Fleeing subscribers also turned out to be those with higher-than-average ARPU. Prepaid ARPU in the quarter was approximately $29 compared to $32 in the year-ago period and $28 in the fourth quarter of 2007.
— Data revenues contributed more than $11.50 to overall post-paid ARPU in the first quarter. Data revenues grew by 19 percent year-over-year, boosted by strong sales of aircards and text messaging.
— Post-paid churn in the quarter was 2.45 percent compared to 2.3 percent in both the first and fourth quarters of 2007. Wireless post-paid ARPU in the quarter declined 6 percent to $56, compared to a year-ago period and declined 4 percent sequentially. Prepaid ARPU in the quarter was approximately $29 compared to $32 in the year-ago period and $28 in the fourth quarter of 2007. The increase from the fourth quarter was thanks to Boost Unlimited subscribers offsetting lower usage among traditional prepaid users.
Highlights from the Conference Call:
-- CEO Dan Hesse said it is too early to tell what trends are emerging from Sprint’s new unlimited plan Simply Everything. He added that part of the rational for unlimited plans was to simplify the customer offering and thereby reduce the number of times they contacted customer care (reducing Sprint customer service expense.) He expects to see continuing pressure on gross additions as Sprint focuses on retention and pursues quality customers.
-- Hesse wouldn’t comment on the speculation that the company might spin-off Nextel, but said that “nothing was off the table.” A spin-off, however, would be very complex, as separating the two networks would be complicated.
-- No comment on Deutsche Telekom (NYSE: DT) acquisition rumors, or anymore specifics on the Clearwire (NSDQ: CLWR) WiMax deal.
Release | Earnings Presentation| Webcast
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