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Sprint Posts Gains, Plans LTE Decision

2/10/2011 11:40:28 AM Eastern
Overland Park, Kan. - Sprint gained more net new wireless subscribers in the fourth quarter of 2010 than it has since the first and second quarters of 2006 and continued to reduce its wireless operating losses, the company announced.

For the quarter, the company posted its third consecutive quarterly gain in net new wireless subscribers following three years of declines.

On other topics during an investors' conference call, Sprint CEO Dan Hesse said he will likely make an announcement before the middle of the year about whether the carrier will switch to LTE technology for 4G data service in the future. The company currently offers 4G WiMAX service that it wholesales from Clearwire, which is majority owned but not controlled by Sprint.

Clearwire late last year launched an aggressive round of cost reductions to conserve cash in case it was unable to raise enough money to continue expanding its 4G network. The company subsequently raised about $1.33 billion by issuing debt, but analysts at the time said Clearwire needed to raise another $3 billion or more of new funding to finish its network buildout.

Speaking to Sprint's potential to offer LTE, Hesse claimed Sprint has the spectrum capacity "to put LTE on our spectrum," although he said Sprint's spectrum would not be able to do so "for an infinite period of time."

Hesse also noted that as part of Sprint's plan to consolidate its separate CDMA and iDEN cell sites and phase out iDEN service beginning in a few years, Clearwire could add its technology to the consolidated cell sites. That could bring "significant economic benefits for both companies," Hesse said.

In other comments, Hesse said 69 percent of the devices sold in the fourth quarter for use on Sprint's CDMA  network were smartphones and that at the end of the year, 50 percent of CDMA subscribers were using smartphones.

Hesse also explained the rationale for adding a new $10/month charge onto new 3G smartphone service plans, all of which include unlimited-data use, rather than offer a variety of plans that would include data-capped plans as well as unlimited-use plans. The $10/month charge was previously imposed only on unlimited-data plans of dual-mode 3G/4G phones.

Offering fewer, simpler rate plans keeps costs down, particularly customer-care costs, he explained. In addition, offering capped data plans run the risk of enticing customers to step down to lower cost plans, he said.

In providing details in its financial report, Sprint said its fourth-quarter gain of almost 1.1 million net new subscribers accounted for most of its full-year gain of 1.78 million, indicating subscriber-growth momentum in the quarter. The carrier's year-end subscriber base hit 49.9 million, up from the year-ago 48.1 million.

 The company also reported its best-ever fourth-quarter and annual churn rates in its postpaid subscriber base at 1.86 percent and 1.95 percent, respectively.

The company's wireless segment continued to reduce its operating losses for the quarter and year, with the fourth-quarter loss falling 58 percent year-over-year to $267 million and full-year losses shrinking 37 percent to $1.23 billion.

Although the indicators are up substantially, the company is "not declaring mission accomplished yet," said Hesse, who came to Sprint three years ago to turn around the company. Nonetheless, he noted that it has been almost five years since Sprint added more than a million customers in a quarter.

The carrier also posted its first quarter of retail (vs. wholesale) postpaid net additions since the second quarter of 2007, he noted. Retail postpaid net adds for the combined Sprint CDMA and Nextel iDEN networks were 58,000 for the quarter compared to a year-ago loss of 107,000. Though the carrier lost 855,000 retail postpaid subscribers for the full year, the losses were substantially lower than 2009's losses of 3.55 million.

The bandwidth-constrained iDEN network lost 395,000 retail postpaid subs in the quarter, while the carrier's CDMA network gained 453,000 postpaid subs.

The carrier enjoyed higher gains in its retail prepaid segment, with net adds rising to 646,000 from the year-ago 435,000 to mark the company's highest ever fourth-quarter gain in net new retail prepaid subscribers. That performance helped bring full-year retail prepaid net adds to 1.64 million, down from full-year 2009's 2.55 million.
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