Sprint Q1 Shows iPhone Dependence

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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 shows.

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.


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