Overland Park, Kan. -- Sprint's post-paid subscriber base will continue to shrink this year, but at a slower rate than last year because network and customer-service improvements are "mitigating the trend lines," CEO Dan Hesse said in announcing the company's second-quarter results. New handsets such as the Palm Pre and BlackBerry Tour worldphone, as well as other new phones to come later this year, are also contributing to slower subscriber losses, he said.
The number of postpaid subscribers lost in the second quarter and first half was up compared with the year-ago periods, but the postpaid subscriber losses slowed sequentially from 1.25 million in the first quarter to only 991,000 in the second quarter, said Hesse. He called the performance the "best" sequential quarterly change in postpaid net subscriber losses since the first quarter of 2007.
Sprint's prepaid Boost service, on the other hand, enjoyed net subscriber additions in the second quarter and first half, reversing year-ago losses and helping reduce the carrier's total subscriber losses compared with year-ago periods. Much of the gain is attributable to the launch of a Boost Unlimited program allowing unlimited talking, push-to-talk, texting and Web browsing for $50/month. Further gains in the fast-growing prepaid market are expected when the carrier closes its purchase of prepaid MVNO Virgin Mobile USA in the fourth quarter or early next year.
Because prepaid gains didn't offset postpaid subscriber shrinkage, Sprint's wireless operation posted declining operating revenues and higher operating losses in the quarter and first half compared with the year-ago periods.
Brand perception took a hit in 2006 and 2007 because of network and customer-service issues, but "it takes time for perception to catch up with reality," Hesse said in explaining the carrier's postpaid struggles. Businesses reducing the number of cellphones they use also contributed to the continuing subscriber-base decline this year, he added.
Over the past three years, Hesse noted, the company's decline in gross subscriber additions has been "fairly significant," and he admitted that "there is no quick fix." But the carrier's improved customer-case and network performance, combined with new devices and "other programs" in the second half, means "we'll start to turn around postpaid performance around gradually," he said.
Other new devices that have helped include the Palm Pre and BlackBerry Tour, which is RIM's second world phone that operates in 3G mode in North American CDMA 1x Rev. A networks and 3G mode in overseas 2.1GHz HSPA networks.
Sprint has begun to provide its indirect channels with a greater supply of Palm Pre smartphones, he noted, and the carrier will broaden its distribution of the BlackBerry Tour world phone "soon." Sprint will offer the Pre exclusively "into 2010." Verizon Wireless has said it would offer the device in early 2010.
In Sprint's wireless operation, year-over-year net operating revenues fell 9.5 percent to $7 billion for the quarter and 10.6 percent to $14 billion for the half. Second-quarter operating losses grew 19.9 percent year-over-year to $314 million but fell sequentially by 43.7 percent from the first quarter's $558 million loss. First-half operating losses grew 13.3 percent to $872 million.
For the quarter, Sprint lost 991,000 postpaid subscribers, up from a year-ago loss of 776,000 subscribers but down from the first quarter's loss of 1.25 million postpaid subscribers. For the half, the number of lost postpaid subscribers hit 2.24 million, up from the year-ago 1.85 million. The postpaid subscriber base at the end of the second quarter fell to 34.44 million from the year-ago 38.9 million.
In prepaid subscribers, Sprint gained 777,000 subscribers, up sequentially from the first quarter's 674,000 and a reversal of a year-ago loss of 138,000. For the half, net adds were 1.45 million compared with a year-ago loss of 338,000 prepaid subscribers.
The carrier's total subscriber base (prepaid and postpaid combined) fell 257,000 in the second quarter compared with a 901,000 loss during the year-ago quarter. The second-quarter loss was higher sequentially from the first quarter's 182,000. First-half subscriber-base shrinkage was 439,000, down from a year-ago loss of 1.99 million subscribers.
At the end of the second quarter, Sprint's total subscriber base was down to 48.83 million from a year-ago 51.86 million.