Sprint Nextel's struggle continues

Samsung's Instinct didn't save Sprint Nextel's quarter, but the company has taken a few baby steps toward recovery.

Despite strong sales of the hot new touch-screen phone, Sprint Nextel reported yet another quarter of losses on Wednesday when it posted second quarter earnings. The Instinct went on sale in June a few weeks before Apple's much lauded iPhone 3G hit store shelves. And it was deemed an immediate success for Sprint as the phone hit record sales within the first week and has sold out of many Sprint locations.

Even though the hot selling product helped spur hope that Sprint was on the comeback trail, the second quarter results and projections of more tough times ahead for the carrier, dashed any hopes that the ship would turn quickly.

Still, Sprint's results didn't suck. And that's an improvement. The company has made significant spending cuts, and some of its other efforts to retain customers seem to be working. The result was the company didn't lose as much money as it had in the first quarter nor did it lose as many subscribers. But management's projections that the third quarter will see more customer losses, dashed any hopes that Sprint might make a quick comeback in the second half of the year.

For the second quarter, Sprint reported it lost a total of 901,000 customers. This is an improvement over the 1.1 million it lost during the first quarter. Its churn rate also fell to 2 percent. The churn rate or the rate at which people leave its service was 2.45 percent in the first quarter.

Sprint also improved its financials, cutting it loss to $344 million compared to a loss of $505 million the previous quarter. That said, Sprint still struggled to generate revenue, which was down 11 percent to $9.06 billion.

While these results mark an improvement over the previous month, investors were spooked by management's projections that subscriber losses and the company's churn rate will likely get worse in the third quarter.

Sprint's biggest challenge is keeping its most valuable post-paid customers. These have been the customers that Sprint is losing in droves to its competitors. For the second quarter AT&T said it had added 1.3 million total subscribers, while Verizon Wireless added 1.5 million customers.

It's clear that these carriers have benefited from Sprint's troubles. But the fact that more than 80 percent of Americans subscribe to cell phone service means that Sprint must win back these customers as well as steal other from its competitors. And this will be no easy task.

So how will Sprint attract new customers and keep existing customers from fleeing?

It's a tough question to answer, but it seems to me that Sprint will have to do three things.

First, it has to improve its basic voice network. Verizon, which is consistently praised for its reliable network, has proven that people will stay with a carrier and pay slightly more for a service if it's reliable. Even though wireless data is the future, people still buy and use a cell phone to make phone calls. And if that doesn't work, the phone and it's service are pretty useless. Sprint seems to have already recognized this point, which is why it spun off its WiMax data assets into the Clearwire venture.

Second, Sprint will have to create more value in its services. The company doesn't necessarily have to slash prices, but it could offer more functionality for less. The $99 Everything Plan is a good start. But Sprint needs more plans like this to appeal to a wide range of customer needs. T-Mobile has executed on this strategy well. It's MyFavs offering, Wi-Fi HotSpot@Home service, and $10 a month VoIP offering, make it an appealing alternative to the other three big carriers.

Finally, Sprint needs more hit phones. The Samsung Instinct is a step in the right direction, but Sprint can't rely on one cool phone to drive demand for its service. AT&T, which has the exclusive rights to the iPhone, also carries a cadre of other cool devices, which can make it more attractive to certain customers looking for cool phones.

The challenge for Sprint, in my mind, is that the company needs to be at least be No.2 in each of these three areas. Verizon may have a great network but it lacks cool phones and its service is expensive. AT&T might have the cool phones, but it lacks a rock solid network and its service is also expensive. T-Mobile's service might offer the best value, but it lacks compelling handsets and its network coverage is far behind its competitors.

If Sprint could improve its standing in all three areas or at least two out of three areas, it could start to win back its former customers and even attract new ones. Of course, the problem is that Sprint's competition isn't sitting still either. Verizon's new open network promises to allow it to offer more compelling handsets, and T-Mobile is building out its footprint and adding 3G.

In the meantime, Sprint is continuing to get its financials in order. The company also announced Wednesday that it intends to make an offering of $3 billion in cumulative perpetual convertible preferred stock. The company ended the quarter with $3.5 billion in cash and $1.2 billion of borrowing capacity under its revolving-credit facility.

[TechExpert777]

I was a Sprint Customer. I purchased an AirCard in April 2008. During my 30 day trial, I had obtained a better offer from AT&T so when I called to cancel, the Sprint Customer Service rep had promised me a 20% discount. I agreed to the offer
I've called every month and the rep said it takes 2 to 3 billing cycles and it should appear on the next billing cycle.

4 months later, still no discount. So I spoke to a Supervisor and he told me that Sprint does not offer a discount on the Aircards since they are already "discounted". I told him I wanted to cancel the service and he said there was a $200 Early Termination Fee. I had to indicate that I was going to cancel within my 30 days if the Customer Service rep had not made a false promise.

He had to waive the fee but shows you how eager Sprint wants to keep their customers... they're willing to let them go!

[Perry_Clease]

Improve customer support, they can be frustrating to deal with. A month or so ago, I had a very positive experience with the staff at a Sprint Store when I need service. However, that is not the norm, well probably for other providers as well.

[njdmac]

To be sarcastic to Sprint/Nextel ... LOL!!!

Don't want to get into any details other than to say I'm not surprised based on several ill-fated experiences with them myself this past year.

Will be leaving them myself in October ... and it will be ... FOREVER!!!

[gsekse]

Three different times I was standing next to someone muttering that they had "no service" or that their call was dropped. I handed them my Verizon phone each time and said, "Try mine, if you like it, dump Sprint when you can and use some other carrier" I dumped my Nextel when I was sitting in traffic in downtown Virginia Beach and had "no service" while the lady in the next car chatted away on her phone. I said, " no way am I paying for a phone that doesn't have service in a major metropolitan area!". I have never regretted my switch, my phone has service that works without dropped calls 99% of the time.

[mravichandran]

My colleague was having sprint's one of slim phones. he is so glad that he switched to at&t - and got himself an iphone. reason: no signal at his new home south of arlington, tx.

[uhpl508]

Thought I generally agree with this article, I don't see any valid basis for stating that T-Mobile "lacks compelling handsets"

[snoopbiscuit]

Horrible Customer Service. They brought this pain on themselves. Period. You can't treat your customers like trash and expect them to stay with you. Oh, and threatening us with "early Termination fees" are even worse. I left Sprint in 2006 after a host of bad customer service experiences, and was charged over $200 for supposedly canceling my contract early. When I asked for evidence that I was canceling early (apparently, I had extended my contract an extra year somehow without even knowing it), I was told that it was up to me to come up with it. Well, its 2008 and I HAPPILY carry my only credit smear from Sprint for not paying that $200. My credit has not been seriously affected by their mark, so the only party they screwed was themselves. Even if I did decide to go back to them, I would not pay it. Burn in Hell SPRINT.

[rec9140]

Don't forget that you users of data will be getting capped at 5Gb/month. Go over that for 2 months straight and you will be terminated!

So those of you using Aircards because Sprint didn't cap... WATCH THOSE BILLS coming to a mailbox near you!

No more slurp it all you can, regardless of the ads.

http://www.dslreports.com/shownews/Sprint-EVDO-Monthly-Caps-Arrive-96742

[Michael_R_08]

I was a customer with Sprint for 4 years! They have terrible customer service! I can assure you that this company has brought this service upon themselves. I know you're hiring people and paying them at best $9/hr but you need to tell your Alorica reps that they are doing a horrible job. If Sprint eventually completely dissolves, it will not be a big surprise to me. They are spitting right in the face of the California court system by not honoring the ruling by the judge and consequently losing several more customers. I will never recommend Sprint to anyone. Come to iPhone land :)

[mastercko]

Though I agree with the gist of this article, I would like to mention my experiences with Sprint.

so, I've been a Sprint customer for about 7 or 8 years now, and I've never had a single problem with them. Before that I was VZW and I could NOT stand their fees and crap, so I switched. I always had a strong voice signal (living in both Northern and Southern California during this period), and 3g coverage was excellent. CS has been helpful for me and I don't remember the last time I dropped a call. I've switched over to AT&T recently for a user study, but fully intend to pay the ETF and switch back to Sprint when it's over. AT&T might have cool phones (Sprint is starting to fix this problem, btw), but the relative spottiness of its 3G is really getting to me. That and Sprint's service is ridiculously cheaper.

Just wanted to provide a counter viewpoint to all the Sprint doom-and-gloomers.

[mccartyseanm]

Odd that none of your solutions included customer service (you must not have been a customer or you have as much disdain for the individual as they) masses = volume but it takes individuals to (=) masses, and Sprint does not, and probably never will, understand that concept. Their shareholders should hope that Microsoft will make THEM an offer!!!!!!!

[Maggie Reardon]

Actually I was a customer of Sprint's for 8 years. And I agree customer service needs to be improved. But I don't think people switch carriers solely because one provider has better customer service than another, although I'm sure it's part of the consideration. I think if Sprint can improve its network, create more value and offer cool phones people likely won't have to deal with customer service much. And if these other elements are really there, I think people tolerate spotty customer service more. Anyway, that's just my opinion. I'm sure others may have a different opinion.

[The_Darklady]

Once upon a time I was a staggeringly loyal Sprint customer. I had it all: long distance, local service, and cell phone. Over time, I drifted to other services. I've clung to the cell phone service primarily from entropy and a love for my call tone. But years and not merely bad but HORRIBLE customer service, in addition to crappy connectivity even in large metropolitan areas. When I couldn't get my phone to connect to 911 successfully, that seemed like a real message from the universe that it was time to move on. My indentured servitude to the great god Sprint/Nextel ends this month and I'll be a Verizon customer very soon...

[problemfree]

There is a 4th item that author of the article forgot to mention or was ignorant to the fact. The item is good customer service. If they correct that then they wont have to do cost cutting. Keep in mind the more you cost cut the more likely you will cut resources which means jobs which means even more waiting on hold for help which means even more peed off people.

[brownmht]

Sprint's problem is simple....CUSTOMER SERVICE....or in Sprint's case, lack there-of. I had Sprint for a year or so.....once a quarter they would suspend my account. I would spend hours trying to get to a human...at which point they would apologize profusely and turn the phone back on. I think the worst was when I went into a Sprint Store and walked up to the "Customer Service" counter....it was like something out of a B flick with the young lady sitting there chewing gum and filing her nails. I asked her how to cancel my account...she looked up like I was bothering her and without saying a word pointed to the "red phone". I did eventually cancel the account and paid a pretty heft sum for early termination. After Sprint and Nextel merged, they reactivated it and turned my account into collections!

So, the fact that Sprint is losing customers makes me happy. I know all but one person I have spoken with about cell phone plans has had similar stories. I also know a lot of former Nextel customers are disenchanted as well.

So, if you believe a company can treat thier customers like crap and expect to keep them, please explain how to your stock holders.

[Perry_Clease]

Customer service. In the past I dreaded dealing with Sprint, but just this afternoon I had another positive experience. I had to call customer support for a problem with my wife's phone and had excellent help from "David." I didn't ask him, but after I hung I got to wondering if they are working on improving customer service. Two good experiences in a row, not necessarily a trend, but one can always hope.

[letterrepdotcom]

When I worked for the government, a clause in Sprint's contract stated that in the event my job sent me overseas for a long period of time, Sprint had to cancel my account. They sent me my final bill, which I paid in full.

Then, two months later, they sent me another bill for $0.68, explaining that this was the amount that accrued on my bill between the time I received the bill and when I returned my check (within the same week). I paid the $0.68. Then, two months later, I received a bill for $0.24, explaining that this was the amount that accrued between the time they notified me of the second bill and when they received my check...within the same week...again. I paid the $0.24. Guess what? I got a third bill. I wrote a lengthy complaint letter and risked an aneurysm in my frustration with Sprint.

Somebody here said they'd never return to Sprint.

Hear! Hear!

http://www.LetterRep.com

[crusadex]

I wish for once Sprint would admit how badly it has treated it's cusomers.Dealing with their CSR's is like dealing with crack dealers.I had my 2 years of hell,never again.
Looks like alot of people are thinking the same way.I love it when Hesse coments about,"High value customers"He must not mean the ones that pay their bill every month and believe what the contracts say but end up with hundreds of dollars of extra charges anyway .To all the prisoners that got set free from Sprint this qtr. I salute you,revel in your freedom.

[joensousa]

Hi,
Know your customer base!! I am a nextel user. I'd would have bought a Touch phone if it had the direct connect capability. I have been waiting for either a new blackberry curve or touch phone with direct connect .

[vansmackCA]

I've been a Sprint customer for almost 12 years, but they are in danger of losing me by requiring me to get their new Simply Everything Plan if I want one of their newer phones (the Instinct, for example). The Everything Plan will cost me $20 more a month (not that big of a deal) but with my family plan, it will cost my wife and me $80 more a month for just me to have the new Instinct. If she wants one too, it will nearly double our current monthly rate, and we don't even use half of our existing minutes! Now why would we do that when both of us can have an iPhone and our combined bill would only be $10 more a month then what we currently pay to switch to at&t?

Do the same with the Touch Diamond next month and you lose both me and my wife in October when our contract is up. Allow us to keep our existing plan and get new phones and you keep us. It's that "Simple."

[benjaminstraight]

Boo Sprint.