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Sprint: 1.8 Million iPhone Activations Exceed Q4 Expectations


Sprint activations of 1.8 million
iPhones in the fourth quarter exceeded company expectations
despite “unusual” iPhone discounting by AT&T and
Verizon, Sprint CEO Dan Hesse said in releasing fourthquarter
financial results.

During the quarter, Sprint chose not to participate in “unprecedented”
discounting of iPhones and other handsets
despite what Hesse called a level of handset discounting
that was “unusual, even by traditional seasonality history.”
iPhones were discounted by $30 or more, and some 4G
LTE phones were sold “at very low rates,” he said.

Though iPhone activations exceeded Sprint’s expectations,
Sprint’s iPhone activations in the quarter were significantly
below Verizon’s 4.3 million iPhone activations and
AT&T’s 7.6 million (see table). Some of the difference can be
traced Sprint’s October 14 launch of the iPhone, whereas
AT&T and Verizon had been selling iPhones throughout the

In other fourth-quarter sales metrics, the carrier said 86
percent of phones activated on the Sprint network by retail
postpaid subscribers were smartphones, boosting the
number of postpaid subscribers using smartphones to 66
percent. In contrast, 56.8 percent of AT&T’s retail postpaid
subscribers were using smartphones at the end of the year,
and 44 percent of Verizon’s retail postpaid subscribers were.

The costs of subsidizing iPhone sales and costs of acquiring
iPhone subscribers was around $630 million during the
quarter, the company said. iPhone costs and the $54 million
in costs to revamp Sprint’s network infrastructure reduced
the quarter’s OIBDA margin by an estimated 8.8 percent
points to a reported 10.8 percent, the company said.

The costs of selling iPhones and meeting Sprint’s volume
commitment to Apple will be more than offset by iPhones’
network efficiency, the ability to attract new subscribers, expected
lower churn rates among iPhone subscribers, and
lower calls to customer care, said Hesse. Forty percent of
activated iPhones went to subscribers new to the Sprint network,
he noted.

Sprint previously said it pledged to buy a minimum of $15.5 billion worth of iPhones over four years.

In other fourth-quarter results linked to handset activations,
the carrier reported its best quarterly increase in six
years in net new subscribers, with the number of net new
subscribers rising 26.6 percent from the year-ago period
to 1.62 million. That gain, which is the seventh consecutive
quarterly gain following years of subscriber losses, expanded
the company’s year-end subscriber base to a record 55
million, up 10.3 percent from year-end 2010.

At 5.1 million, the number of net new subscribers for the
full year was the biggest since 2001 and was up substantially
from 2010’s 1.78 million.

Despite the subscriber gains and a 7.6 percent
increase in wireless revenues to $7.92 billion,
Sprint’s wireless operations posted a fourth-quarter
net operating loss of $500 million, up from a
year-ago loss of $267 million and in contrast to
a third-quarter operating profit of $131 million.
For the year, wireless operating losses shrank to
$256 million from 2010’s loss of $1.23 billion.

However, with wireless’ annual operating losses
shrinking, Hesse said Sprint’s wireless turnaround
is entering a second phase in which the
company is investing for future growth.