Sprint reports minor profits and not-so-minor loss of customers for Q2 2014, not out of the woods just yet
By Peter K.
Jul 30, 2014, 7:48 AM
Just as we told you several days ago, Sprint just released its financial report for Q2 2014. The third largest US carrier reported that it has brought home a net income of $23 million (or $0.01 per each share), which seems to be “the best performance in almost seven years”. Also, the carrier reported that it scored consolidated operating income of some $519 million throughout the trimester, which is its highest result for the last seven years as well. As a comparison, just a year ago Sprint reported catastrophic losses of $1.6 billion.
“We reached several key milestones for the company this quarter, including largely completing a multi-year project to upgrade our core 3G and voice network, expanding 4G LTE coverage to approximately 254 million people and launching nationwide availability of HD Voice,” Sprint CEO Dan Hesse claimed.
Sprint's earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to$1.83 billion during Q2, which is a whopping 30% upward spike compared to the same period year-over-year. The EBTIDA margin of almost 24% is also a record-breaking one, as Sprint has not seen better results during the last 6 years. The company claims that the main reason for this increase are the reduced expenses in certain departments.
Sprint's report caused the company's stocks to increase by 1.9%. However, said shares had lost 16% of their value during the past two months and 26% year-over-year.
Sprint revealed that it has successfully expanded the coverage of its LTE and HD Voice services and now cover more than 254 million people. Unfortunately, this expansion did not lead to a subsequent increase of its user base - on the contrary, the carrier reports that it lost 220,000 of its customers in Q2. Compared with the client losses during the previous two quarters (383,000 and 520,000, respectively), the Q2 one is not that bitter.
"Our complete network replacement impacted the network experience, so we lost customers last quarter," Sprint CEO Dan Hesse claimed.
Sprint's heavily-rumored acquisition of T-Mobile, which might be the result of a possible deal between SoftBank and Deutsche Telekom, might be one of the ways to stop the bleeding of customers. Sprint is allegedly backed up by several banks, which will finance the merger. It's speculated that the acquisition sum will vary between $30 and $40 billion.
OVERLAND PARK, Kan. (BUSINESS WIRE), July 30, 2014 - Sprint Corporation (NYSE:S) today reported operating results for the first fiscal quarter of 2014, including net income of $23 million, the best performance in almost seven years when excluding the non-cash transaction-related impacts from last year, and consolidated operating income of $519 million, the highest in more than seven years.
“We reached several key milestones for the company this quarter, including largely completing a multi-year project to upgrade our core 3G and voice network, expanding 4G LTE coverage to approximately 254 million people and launching nationwide availability of HD Voice,” said Dan Hesse, Sprint CEO. “Our complete network replacement impacted the network experience, so we lost customers last quarter. To improve customer confidence given our recent network build progress, we launched the Sprint Satisfaction Guarantee, which invites customers to experience our new and improved network and enjoy the value of our Sprint Framily plans.”
Adjusted EBITDA* of $1.83 billion grew 30 percent over the prior year period and Adjusted EBITDA* margin of nearly 24 percent was the company’s best in six years. Wireless Adjusted EBITDA* of $1.8 billion increased nearly 40 percent from the prior year period, driven mostly by lower expenses across several areas of the business, partially offset by declining wireless service revenues. Lower postpaid subsidy costs associated with impacts of the Sprint Easy Pay installment billing plan and device sales mix as well as lower customer care and cost of service expenses all contributed to year-over-year growth in Wireless Adjusted EBITDA* of nearly $500 million.
Sprint Platform Subscriber Loss Improves
The Sprint platform reported a net loss of 220,000 customers in the quarter, compared to a net loss of 383,000 customers last quarter and 520,000 customers in the prior year period. Sprint platform postpaid net losses of 181,000 during the quarter were largely due to expected elevated churn levels related to service disruption associated with the company’s ongoing network overhaul. However, Sprint platform postpaid gross additions grew by 16 percent compared to the year-ago quarter, and retail smartphone sales were nearly 5 million, representing a record 87 percent of total retail handset device sales in the quarter. Sprint platform prepaid net loss of 542,000 customers was primarily caused by the timing of the annual Lifeline program recertification process that impacted the Assurance Wireless® subscriber base. Sprint added 503,000 wholesale and affiliate customers during the quarter. The Sprint platform served over 53 million subscribers at the end of the quarter.
Network Deployment Reaches Key Milestones
Sprint’s replacement of its entire 3G and voice network, one of the most complex network upgrades in history, is largely complete and network performance metrics continue to improve. Sprint also hit its mid-year target for 4G LTE coverage, as the company now covers approximately 254 million people in 488 cities across the country including Pittsburgh and Buffalo, N.Y., which launched today.
Sprint HD Voice service is also now available nationwide and represents the new Sprint standard for crystal-clear voice calls. Sprint’s HD Voice provides fuller, more natural-sounding voice, plus noise-cancelling technology that virtually eliminates background noise from places like busy roads or crowded restaurants1. Over 16 million customers currently have HD Voice-enabled devices.
The deployment of Sprint Spark™, an innovative combination of advanced network and device technology that leverages the company’s 800MHz, 1.9GHz and 2.5GHz spectrum, continues to progress and is now available in 27 markets across the country. Twenty-two Sprint Spark-capable devices are currently available, including the recently launched Samsung Galaxy S® 5 Sport, LG G3, and HTC One (M8) Harman/Kardon® edition.
Sprint Satisfaction Guarantee Demonstrates Confidence in America’s Newest Network
In June, the company announced the Sprint Satisfaction Guarantee, providing wireless users a worry-free experience of Sprint’s improved network, exclusive Framily plan and unique services. If customers aren’t completely satisfied with the Sprint experience within the first 30 days, Sprint will refund the cost of their device and waive all service and activation charges.
Sprint Earns Third-Party Recognition for Customer Experience, Innovation and Corporate Responsibility
According to results from the 2014 American Customer Satisfaction Index released in May, Sprint is the most improved U.S. company in customer satisfaction, across all 43 industries, over the last six years. Additionally, Light Reading recognized Sprint with a 2014 Leading Lights Award in the category of Most Innovative 4G Service for Sprint Spark. Sprint was also the winner of the Informa Telecoms & Media MVNO’s Industry Awards Best Wholesale Operator for the second consecutive year.
Sprint also received multiple awards for its corporate responsibility efforts during the quarter. Sprint was recognized by the Department of Energy for achievements in the Better Buildings Challenge for energy reduction, and the Environmental Protection Agency recognized Sprint with the WasteWise National Partner of the Year Award for Very Large Companies for diverting solid waste from landfills. Additionally, Sprint received the VITA Achievement Award for Environmental Sustainability from the Wireless Foundation.
The company continues to expect calendar 2014 Adjusted EBITDA* to be between $6.7 billion and $6.9 billion.
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