Sprint blames economy for Q1 customer losses
Update 7:22 a.m. PDT: This story was updated with comments and information from the company's conference call.
Sprint Nextel is blaming the economy for a steep decline in subscribers, though its prepaid and wholesale businesses are seen as important growth areas as the company faces stiff competition.
Meanwhile, financial losses mounted in Sprint's first-quarter earnings released Monday.
"We are happy about the success of Boost Unlimited (prepaid, no-contract service) and our wholesale business," Dan Hesse, Sprint's CEO said during a conference call with analysts and investors on Monday. "But the economy has created some challenges."
Sprint reported a loss of $594 million or 21 cents per share, for the three months that ended March 31, a decline of 18 cents per share from the same quarter a year ago. Revenue was also down about 12 percent to $8.21 billion. Analysts had expected about $8.28 billion in revenue.
The company lost a total of about 182,000 wireless customers during the quarter to end with a total of 49.1 million.
Meanwhile, competitors AT&T and Verizon Wireless each added customers for the quarter. AT&T added 1.2 million new wireless subscribers and Verizon Wireless added 1.3 million.
Contract customers are considered valuable because they typically spend more on their service per month. And because of the contracts, they don't cancel service as often as customers without contracts.
Sprint has been losing contract customers for several quarters due, in part, to poor customer service and increased competition from AT&T and Verizon. But Hesse said on the conference call that the heavy losses were business subscribers--not consumers.
He said that layoffs and corporate downsizing over the past few months have led many businesses to reduce the number of BlackBerry devices and other phones used by employees. This was especially true in manufacturing and construction, which are big subscribers to Sprint's push-to-talk service on Nextel's iDEN network. Hesse said that Sprint relies more heavily on business subscribers than its competitors do and, as a result, has been affected more by these layoffs than its rivals. That said, Hesse believes that when the economy turns around, business subscribers will come back.
The loss of these business customers contributed to an increased churn rate. Churn for the quarter, or the rate at which customers cancel service, was 2.25 percent in the first quarter. This was up from 2.16 percent in the fourth quarter, but down from 2.45 percent a year ago.
On a positive note, Hesse said that Sprint's Simply Everything plan, which was launched last year and offers unlimited voice, texting, e-mailing, and Web surfing for $99 a month, has helped increase monthly spending for individual subscribers.
"Now if you look at our churn characteristics, it's inversely related to the lowest churn among the highest ARPU (average revenue per user) customers," he said. "And the highest churn is among the least valuable customers. So churn is actually better than it looks."
The biggest success story of the company's quarter came from the launch of its Boost Unlimited. This service, which offers unlimited voice and messaging service for a flat rate of $50 a month with no contract, operates on Sprint's iDEN network, launched in late January and has been deemed a big success so far.
"There is no question that there is a movement toward prepaid," Hesse said. "And we currently have some strong offers out there."
Hesse said he believes that the prepaid market will actually help expand the entire wireless market.
"Some of these prepaid customers are people using cell phones for the first time," he said. "So I think overall, as an industry, we will see more revenue growth than we would have seen without prepaid services."
Sprint also saw some uptick in subscriber growth on its wholesale network with 394,000 new customers. And Hesse said that growth in wholesale is a big opportunity and that he sees more growth coming from devices, such as Amazon.com's Kindle e-book reader.
Beyond products and services, Sprint also did a fairly good job cutting costs. While some of the losses in the first quarter were one-time charges associated with its staff reductions, Hesse said that the cuts will help the company generate more cash to help it pay down its debt obligations.
Hesse didn't comment directly on a report from The Wall Street Journal that said the company is planning to outsource its network operations to telecommunications equipment maker Ericsson. But he said the company is focused on generating cash and would consider "alternatives that makes a lot of sense for the company."
Looking forward, Hesse said he expects to see more growth from the Boost Unlimited servoce. And he said the company has a strong lineup of new handsets for its subscribers with contracts. The handsets include the Palm Pre, which is due out this summer. Beyond that, he said, Sprint is expecting to see some growth from 4G subscribers on the Clearwire network who will want dual-mode devices that switch between 3G and 4G services. Clearwire is expected to have 10 markets up and running with the new 4G WiMax service by year's end.
"Most of the major initiatives in the postpaid market are geared to have a major impact in second half of the year," Hesse said, referring to customers with contracts. "With the Boost Unlimited (prepaid) service, it's still too early to tell. We see no evidence (that this was due to a big grand opening). Our goal is to have similar net additions and growth for Boost Unlimited in the second quarter as we had in the first quarter."
Marguerite Reardon has been a CNET News reporter since 2004, covering cell phone services, broadband, citywide Wi-Fi, the Net neutrality debate, as well as the ongoing consolidation of the phone companies. E-mail Maggie. 
Even the Nextel lovers are starting to give up on them.
The only reason that i have stayed is for the security of the one phone # that I have had for almost 15 years. (long story) Now that AT&T is willing to move my number over to their network - ie finally getting my iphone - I am just waiting for the contract to run out.
Hey Sprint - can you hear your customers now? - we're leaving.
The real problem I see Sprint facing is their complete lack of phones. They are losing customers left and right because all of the best new phones are coming out on other networks.
1) They were WAAAAAY behind the curve on technology. Took them forever to have a single phone capable of Bluetooth (Sony-Ericsson T608) when other carriers had multiple Bluetooth-capable phones.
2) Most of the phones they pushed were Samsung and they simply did not perform very well on Sprint's network. Before I get flamed by any Samsung fanboys out there, I cannot comment on how Samsung phones perform these days but back then, Samsung on Sprint was synonymous with low battery life and lots of dropped calls. Both situations were significantly better when I used a Sanyo or Sony-Ericsson phone on the same Sprint network.
Word of mouth is a double edged sword. Sprint went for a long time without putting customer's needs (like call reliability and technology convenience features) first, and they are paying the price.
I had lost their phone and went to one of the Nextel / Sprint affiliates to get another. They told me that if I paid for a new one and didn't get the extension then I would have no trouble. Apparently these affiliates make their money on commissions for writing up new two year contracts because I was hoodwinked into signing another when I thought all I was doing was keeping me phone number from my account. I had always paid in advance and had a credit, but never got a bill. Somehow I got a huge bill but didn't get any accounting for it. I am so pi**ed right now I could bite railroad spikes in half.
DW
For Sprint, imho, they bought NexTel to try to not be the smallest carrier in the US. They knew NexTels' iDen was not compatible and anyone (in Sprint) who thought they'd be able to get NexTel users to change were, simply, idiots. The biggest 'win' for Sprint was, of course, that Nascar now has "Sprint" cups instead of "NexTel".
I've read rumours, on tech sites, about T-Mobile, Comcast and some of the original NexTel people being interested in trying to get NexTel back - NexTel works, is viable and their base appreciate an organisation that (a) knows what it is doing and (b) doesn't suck, unlike Sprint ... from both a corporate & non-corporate perspective.
One of the only things going for Sprint, imo, is that they will bend over backwards to get corporate business ... coming up with extremely deep discounts that no other carriers will match but, as the saying goes, you get what you pay for ... and with Sprint, their back-end systems are poor, customer service is lacking and so is coverage.
Sprint is akin to GoodLink - still playing catch-up while wanting to be 'great'. They have a very long way to go.
e.g. the Samsung Ace, touted as a world-phone has GSM 900 & 1800MHz however some South American countries use the same GSM frequencies the US uses - 850/1900MHz so the device is worthless there. Also that device is touted that it will work in Japan ... Japan went their own way with UMTS and WCDMA. They are now, slowly (for some reason) deploying limited CDMA - a step backwards - and the coverage is so poor it's not worth it. Check the specs of the device and coverage maps - and take the maps with a little pinch of salt.
I see Sprint ads talking about 4G and I wonder why they are even trying to have 4G when they cannot do 1G right. If the foundation is weak, the whole house will be weak. Sprint is bleeding customers because of lousy service and lousy support. I have a friend with a Nextel and every time I call, be it weekdays or weekends early or late, it always goes straight to voicemail. Is he using the phone? No. Is he in a dead zone? No. It is Sprint.
I had Nextel. When Sprint bought Nextel I told them the reason I was canceling was because of Sprint. I went back to AT&T, which was Cingular, which was BellSouth. Where I live, BellSouth was the first digital service and it was GSM. Thus where I live, AT&T is as good as Verizon. And the prices are a lot better than nickel-and-dime phone-crippling Verizon too. Every carrier has good and bad coverage areas, except Sprint. Sprint only has bad areas.
When I got to Sprint, I did it as a family plan with my sister. We got unlimited data, 1500 minutes, 3G access, and 2 free blackberry curves on a 2 year contract. I've been super happy with the service and network coverage so far. The only dead spot I really ran into was the state of Delaware. Everywhere else works great; in my office building, I'm the only one that can get coverage while everyone else has to use the land line phones.
When people hate on Sprint coverage and service, I have to disagree because while I've been with them for 5 months, I've yet to have a dropped call and had great coverage over the Maryland, DC, Virginia area. When a train was delayed in a tunnel on the DC Metro system, I was one of the few in my group of friends that was able to contact another group and tell them that we were late.
The losses in Sprint is a real shame because I haven't experienced any of the difficulties that others have had.
Sprint has the worst customer service, a mean and hateful company, and I live near their headquarters. Take your business somewhere else, that is my pennies worth.
http://articles.moneycentral.msn.com/SmartSpending/ConsumerActionGuide/TheCustomerServiceHallOfShame.aspx
Wonder if Sprint will make the 2009 list. The black and white ads where Dan Hesse talks about simple, all-inclusive plans is clearly intended to communicate that the mess is behind them. New CEO, new monthly plans, everything is good now, so please ignore that army of unhappy former customers....
Time will tell whether they have improved. Sprint had major issues with billing errors (due to problems integrating disparate systems) and renewal of contracts without customer consent (due to incentivizing service reps to renew contracts, which led to the less-ethical reps simply renewing any customer who called in for support).
I was personally overcharged and lied to by their reps. Since Sprint has never made any effort to make amends (despite being aware of the problems), I will always regard them as a fundamentally dishonest company, and will continue to encourage people to avoid them.
Since leaving Sprint I have been quite happy with both T-Mobile and Verizon (only left T-Mobile to get on an employer plan with Verizon) and have consistently recommend both companies as alternatives to Sprint. Note that T-Mobile, far from being a Hall of Shame candidate, gets consistently high marks for their customer service. You can always find people to complain about any big company, but that does not mean they are all the same. Some are much better than others. Sprint is one of the worst, as independent sources like MSN will attest.
"The Economy" is simply a convenient EXCUSE for going under...and they ARE going under!!!...you just watch and see. I give 'em about three to five more years before they start crying for "government 'help'".
The fact is, Verizon is having people coming on here and bad mouth them. Don't listen.
http://www.mefeedia.com/entry/sprints-new-4g-speed-demon/12905545
Fact is, voice quality depends on your REGION. And Nationally, according to JD Powers, Sprint and Verizon BOTH have the top call quality. ATT and TMobile are behind.
When it comes to DATA NETWORK, Sprint's EVDO Can't be beat. Period.Sprint's 3G and soon-to-come 4G are blazing fast.
Do your research and stop listening to Sprint haters. There are plenty of professional tests done that are public - google it.
What good is 3G and 4G to a phone? When I make a call, I can promise you I care nothing about whether I am using 1G or 2G or 3G or 4G or beyond. I just want to make a call and not drop my call. Speed is irrelevant for calling. If Sprint is betting on a data network to save their phone network, they are even stupider than I thought.
When Sprint bought Nextel, all the had to do was not mess it up, and they couldn't even do that. Even without switching from iDen to CDMA, Nextel service went in the toilet.
Shall I give you the names of those regular people? And no, I do not have Verizon. Never have, never will.
I'm not a Sprint hater, I'm a Sprint victim.
AT&T's network is horrendous in both voice and data - that's a fact. They live on the i-Phone sales and marketing - other than that, my mom, my sister and my dad all hate AT&T's service and think it's a crime they can even claim "more bars in more places"... Dropped calls - you wanna talk about dropped calls? We won't even go into AT&T's customer service - which is also horrendous.
Bottom line - there are people who hate their carrier depending on region. And different regions have different service quality.
My family is full of REGULAR PEOPLE too - and we can all say that AT&T has horrible service.
But you may have a different experience.
Long BEFORE THEN, Sprint will have a nationwide 4G WiMAX service. Sprint already has 4G in Baltimore TODAY - with another roll out coming soon. We're talking cable speeds.
So you tell me who's archaic? Don't believe all the hype you see.
If I ever lose my grandfathered SERO plan, I am gone.
- by kinncreek May 4, 2009 2:18 PM PDT
- As I told the last Sprint rep.I talked with, the happiest day of my life is when they go broke( aside from the people who loose their jobs). Their service is terrible and certainly not worth the price.
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