Sprint Swings to a Loss

Sprint (S Quote) stumbled into another earnings miss Wednesday, as the telco lost 220,000 postpaid customers in the first quarter.

The Reston, Va., telco lost $211 million, or a nickel a share, for the quarter ended March 31, reversing the year-ago continuing operations profit of $419 million, or 14 cents a share. Revenue was flat at $10.1 billion.

Adjusted earnings before amortization fell to 18 cents a share from 26 cents a year ago. Analysts surveyed by Thomson Financial were looking for a 23-cent profit on sales of $10.3 billion.

"Our plans in 2007 call for a substantial increase in the funding of business operations to build long term growth and profitability," said CEO Gary Forsee. "We established a quick ramp on these investments in the first quarter to accelerate our progress. These increased commitments, along with notably higher device subsidies to drive acquisition and retention, impacted our profitability in the quarter."

Post-paid churn for the quarter was 2.3%, compared with a little over 2.3% in the fourth quarter 2006 and 2.1% in the year-ago first quarter. In the quarter, CDMA churn improved sequentially and year over year. The iDEN post-paid churn rate increased in the quarter, although total deactivations were modestly lower sequentially. Churn within the former Nextel Partners base improved from the fourth quarter but remained significantly above core iDEN levels.

Compared with the year-ago period, prime credit gross additions increased 14%, while subprime declined more than 30%. Sequentially, post-paid gross additions were flat and prepaid gross additions increased. Total revenue declined 3% sequentially because of a lower post-paid average revenue per user, or ARPU, and a decline in equipment revenue associated with more aggressive acquisition and retention handset pricing.

Post-paid ARPU in the quarter was a little more than $59, a decline of slightly less than 5% from the year-ago period and a decline of a little under 2% sequentially. In the quarter, lower voice contributions to ARPU were partially offset by increased data contributions. CDMA ARPU declined 1% from the year-ago period, while iDEN ARPU declined 9%.

Boost Mobile ARPU was a little more than $32 for the quarter, which was a 2% sequential improvement but a 12% decline from a year ago. Data service revenue was nearly $1.2 billion in the quarter, an increase of 44% compared with the year-ago period and a 5% sequential increase. Data contributed $9.25 or 16% of overall ARPU in the quarter and represented more than 20% of CDMA ARPU.

The company reaffirmed its 2007 revenue target of $41 billion to $42 billion. Sprint sees capital spending of $7.2 billion and an investment of up to $800 million for intangible costs associated with re-banding iDEN spectrum.