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Sprint Q1 Shows iPhone Dependence

Overland Park, Kan. – Sprint depended
on activations of 1.5 million iPhones in the first quarter to expand its postpaid
Sprint-network subscriber base, the company’s first-quarter financial report

In releasing its financials, the
carrier also announced plans to offer 4G WiMAX service through its prepaid
Virgin Mobile and Boost Mobile brands sometime during the second quarter.
Sprint did not disclose additional details.

The prepaid WiMAX rollout will
coincide with Sprint’s rollout of 4G LTE service for Sprint-brand subscribers. The
company said it is on track to offer LTE in six markets by midyear and expand
service to markets by year’s end covering 100 million to 120 million consumers.

In releasing financial details,
the carrier reported its second consecutive quarter of wireless operating
losses as it continues to spend to improve its network, add LTE service and
shut down its 2G Nextel iDEN network. Another contributing factor was handset
subsidies, which rose to $1.6 billion from a year-ago $1.1 billion. The
year-over-year increase “is primarily due to the launch of the iPhone [in
October 2011], which on average carries a higher subsidy rate as compared to
other handsets,” the company said.

The operating loss hit $331
million compared to a year-ago operating income of $140 million. Full-year 2011
operating losses were $256 million, down from 2010’s loss of $1.23 billion.

The wireless operating loss came
despite a 7 percent year-over-year gain in wireless operating revenues to $7.95
billion. The gain was attributed to higher postpaid revenues per subscriber, in
large part due to increases in prices and fees, including the imposition last
year of a $10/month data-plan surcharge on new subscribers, the company said.

Total net subscriber additions
hit 1.08 million, which was down 3.2 percent from a year-ago 1.12 million but
nonetheless marked the sixth consecutive quarter of million-plus net subscriber
additions. The numbers include subscribers of Sprint-brand service, Nextel-brand
service, and subscribers gained through wholesale and affiliate channels.

Total net subscriber gains
expanded Sprint’s total subscriber base to a record 56.1 million, up from a
year-ago 51 million.

In its postpaid Sprint-brand
subscriber base, the carrier gained 263,000 net new subscribers, up from a
year-ago 253,000, thanks to the iPhone. Of the more than 1.5 million iPhones
activated in the quarter with Sprint-brand postpaid service, 44 percent — or
660,000 — were activated by consumers new to Sprint, the company said.

Fourth-quarter iPhone activations
were 1.8 million.

In revealing other sales data,
Sprint said 86 percent of handsets purchased in the quarter for use on Sprint-brand
postpaid plans were smartphones, putting the installed base of postpaid Sprint-brand
subscribers with smartphones 69 percent.

The company also revealed that Sprint-brand
postpaid churn rose to 2 percent from a year-ago 1.78 percent, but Sprint called
the rise temporary because the majority of the rise was the result of indirect-channel
price promotions that have since ceased. Many of the subscribers gained through
these pricing actions had to be disconnected because of lack or payment or
terms and conditions violations, Sprint said. To prevent such promotional
activities by indirect retailers, Sprint tightened its credit standards during
the third and fourth quarters of 2011.