UPDATE at 5:17 a.m. PST: Comments added from the company's conference call.
There was good news and bad news in Sprint Nextel's fourth-quarter earnings report on Thursday. But mostly it was bad.
First, the good news: Sprint narrowed its losses considerably, compared with a year earlier. For the fourth quarter, Sprint lost $1.62 billion, or 57 cents a share. This is certainly better than the $29.45 billion, or a whopping $10.36 a share, it lost during the fourth quarter of 2007. The previous year's losses were due to some large write-downs the company was forced to take related to its merger with Nextel. This time around, Sprint only had about $1 billion in write-downs.
Now for the bad news: Sprint is still losing customers. And as a result, its quarterly revenue declined about 14 percent to $8.43 billion.
Sprint, the third-largest wireless operator in the U.S., said it lost about 1.3 million subscribers during the fourth quarter. It now has about 49.3 million subscribers. The majority of the losses came from the highly coveted contract-customers, of which Sprint lost about 1.1 million.
Sprint's continued customer loss comes as bigger rivals AT&T and Verizon Wireless add customers. AT&T reported last month that it added 2.1 million subscribers during the fourth quarter, while Verizon Wireless added 1.4 million.
It should come as little surprise that Sprint's churn rate, or the rate at which customers ditch its service, was up slightly to 2.16 percent. The previous quarter it had been about 2.15 percent, much higher than its competitors.
Sprint has steadily been losing customers for the past several quarters as many former customers complain of poor customer service. Dan Hesse, who took over as CEO in 2007, has made big efforts to improve the company's image. He has even appeared in several of the company's TV commercials and in marketing materials. But the efforts seem to be making little difference as the company continues to shed subscribers.
Hesse said during the company's conference call with analysts and investors that the company's messages will take time to resonate with customers.
"Subscriber losses and revenue declines are still unacceptably high," he said. "But it takes time for perceptions about our customer care and financial stability to catch up to the reality."
And with the U.S. recession, there is even more pressure on Sprint to maintain its current customers and grow its base. The company's strategy right now seems to be to compete on value. Last year, it started offering a $99 Simply Everything plan that includes national calling, unlimited SMS/MMS, data, text, e-mail, and Web surfing. This week, it announced it is adding laptop 3G data service to the plan for an extra $50 a month.
The company's prepaid brand, Boost Mobile, has also been trying to win over customers who are looking to lower their cell phone bills. It recently started offering a $50 a month flat rate plan.
While AT&T and Verizon Wireless appear to be weathering the economic storm rather well, Sprint and T-Mobile USA, are struggling to win new customers and keep old ones from leaving.
Sprint has already said it will cut about 8,000 jobs. But the CEO has said the company will not lose workers who deal directly with customers since he is determined to improve the company's customer service.
Overall, Hesse said he is pleased with the company's progress as he and his team work toward improving the company's financial fundamentals and subscriber losses. He added that the economic downturn hasn't made his job of turning around Sprint any easier, but said the company is in a good position to weather the storm.
"In 2009, we expect both both post-paid and total subscriber losses to improve," he said. "And we will continue to generate free cash flow. I still believe the wireless industry is relatively well positioned in this weak economy."