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Sprint Cites iPhone Upside

Overland Park, Kan. – The iPhone 4
and 4S attracted more new subscribers to the Sprint network in their first two
weeks of availability than any other smartphone introduced by the carrier, Sprint
CEO Dan Hesse said.

Speaking during an analyst’s
conference call, Hesse also said the phone’s ability to attract gross
subscriber additions in the first two weeks exceeded company forecasts.

The iPhone will not only attract
new customers to Sprint but also keep existing subscribers from leaving, he
said. The top reason that subscribers drop Sprint’s postpaid CDMA service, he
contended, has been the lack of an iPhone.

The iPhone will not only accelerate
the expansion of the carrier’s CDMA subscriber base, he said, but it will
deliver at least 50 percent more profit per user compared to users of other
Sprint smartphones. The reasons include the iPhone’s more efficient use of
spectrum through optimized apps and content services. Another reason is that
iPhone users are less likely to churn and less likely to need customer support,
he said.

The ability to attract new
subscribers and deliver higher profitability justifies Sprint’s contract to buy
a minimum of $15.5 billion worth of iPhones over four years, he said.

In other smartphone comments,
Hesse pointed out that 80 percent of postpaid-CDMA phones sold in the third
quarter ending September were smartphones, up from the second quarter’s 76
percent. A total of 62 percent of postpaid-CDMA subscribers were using
smartphones in the third quarter, up from the second quarter’s 58 percent.

In other third-quarter metrics,
the carrier announced that it gained 1.3 million net subscriber additions,
hitting a 5.5-year high and marking the fourth consecutive quarter of more than
1 million net adds. It was also the carrier’s sixth consecutive quarterly gain
after years of subscriber losses.

Sprint stressed that the
subscriber gains came before it launched its iPhones on Oct. 14.

The third-quarter gain of 1.3
million net new subscribers followed a second-quarter gain of 1.1 million and a
third-quarter 2010 gain of only 644,000.

The carrier’s wireless subscriber
base grew to more than 53 million people.

Other wireless metrics follow:

Wireless operating income:

The company’s wireless operations returned
to the black after posting an operating loss in the second quarter. The first
quarter marked the carrier’s first quarterly operating income after 12
consecutive quarterly losses.

For the third quarter, the
wireless operation posted $131 million in operating income, up from year-ago
operating loss of $345 million and a second-quarter loss of $27 million.

For the year to date, wireless
operating income hit $244 million compared to a year-ago loss of $962 million.

Wireless revenue:

Net revenues rose 4.8 percent to $7.52 billion
from a year-ago $7.2 billion and rose sequentially from the second quarter’s
$7.5 billion.

For the year to date, wireless
revenues were up 5.4 percent to $22.4 billion.

New subscribers:

Among the 1.3 million net new subscribers
generated in the third quarter, most were prepaid subscribers or subscribers
obtained by selling service on a wholesale basis to mobile virtual network
operators (MVNOs) or to affiliates.

Sprint gained 485,000 company-brand
prepaid net adds and 835,000 wholesale net adds but posted a net loss of about
44,000 company-brand postpaid subscribers. The postpaid loss came because a
gain of 265,000 postpaid CDMA-network customers failed to offset the loss of
309,000 customers on the company’s 2G iDEN network, which is being phased out.

The postpaid net loss was smaller
than the year-ago loss of 107,000.