Sprint's customer losses continue in 2nd quarter
Updated 8:57 a.m. PDT with information from the conference call.
Despite improvements in its network reliability and customer service, Sprint Nextel is still losing high-value customers as the company reported a wider-than-expected loss for the second quarter of 2009.
The company reported a loss of $384 million, or 13 cents a share, compared with a loss of $344 million, or 12 cents a share, during the same quarter a year ago.
Revenue also fell about 10 percent to $8.14 billion. Analysts had expected a loss of 2 cents a share on revenue of $8.13 billion, according to the Reuters news service.
As it has done in recent quarters, Sprint lost valuable post-paid customers--that is, subscribers--in the quarter just ended, albeit at a slower rate. CEO Dan Hesse said during the company's conference call with investors and analysts that Sprint has made significant progress in improving its customer satisfaction ratings, but he admitted the company is still dogged by continued customer losses.
Over the past seven quarters, Sprint has lost nearly 7 million subscribers--during the second quarter it shed about 991,000 of them, an improvement over the 1.25 million lost in the first quarter. These are high-value customers who typically sign a contract and pay monthly for their service. They tend to spend more per month than customers paying in advance for services.
Meanwhile, competitors AT&T and Verizon Wireless each added subscribers during the second quarter. AT&T added 1.4 million customers in the second quarter and Verizon Wireless added 1.1 million subscribers.
Sprint managed to improve its churn rate, or the rate at which the company's post-paid subscribers ditch its service for another provider's service, in the second quarter. But this rate was still higher than it was a year ago and still higher than rivals AT&T and Verizon Wireless. Sprint's churn rate in the second quarter was 2.05 percent, down from 2.25 percent in the first quarter. This was also higher than the 1.98 percent churn rate the company reported for the same quarter a year earlier.
Hesse said that retaining existing customers and adding new ones is a priority for the company.
"We have to increase the number of gross adds on the post-paid side," he said. "We need to have more customers coming in and a higher percentage of customers on contract. The overall issue for us is to turn around this post-paid trend."
Hesse said that the company has greatly improved customer service and network reliability. As a result its service is scoring higher in customer satisfaction surveys, but he said that it will take a long time for these improvements to manifest in improved subscriber numbers and churn rate.
"The trend line we've seen for the past three years is a reduction sequentially in gross subscriber additions," he said. "We've been working hard to mitigate that and slow the decline. We are making significant progress. But it takes a while for customer perception to catch up with reality."
Hesse blamed much of the recent customer declines on the ailing U.S. economy. A large portion of Sprint's post-paid subscribers are business customers. While these customers tend to be more loyal and generate more revenue than consumers, currently these customers are spending less on services as companies layoff employees. Hesse explained that these corporate customers aren't canceling their contracts entirely, but they are deactivating phones, which affects the company's overall subscriber count and revenue.
A boost from Boost Mobile
On a positive note, Sprint did gain strength in its prepaid business. The company added some 938,000 new prepaid customers to its Boost Mobile brand during the quarter. This was more than analysts had expected, which forecast a gain of between 500,000 and 900,000 new customers. Boost's $50 unlimited voice and data plan, which launched in January, likely helped attract many new prepaid customers.
Executives on the conference call said that Boost customers, which use Sprint's iDEN network, are starting to spend more per month on their service. And the churn is improving. But the company does see that these customers use about twice as many voice minutes and data services than post-paid iDEN customers. Still, Sprint says that it has upgraded the network to ensure it can keep up with demand.
When the unlimited service first launched, some Boost customers complained of delayed text messages. But that issue has supposedly been resolved.
In an effort to bolster its prepaid business, Sprint announced on Tuesday that it plans to spend $483 million to buy prepaid provider Virgin Mobile USA. Hesse wouldn't provide details about how Sprint will integrate the Virgin Mobile service into its overall prepaid strategy, but he said that the acquisition should help the company grow this part of the business.
"We see an opportunity to use the two brands (Boost Mobile and Virgin Mobile) very effectively," he said. "The Boost brand has traditionally been strong in its segments, and our unlimited offering is expanding the relevance of that service, which is why gross additions are up. Virgin has historically been very strong in the youth market. And we think that these two brands are better than one."
Some analysts question the profitability of prepaid services and inexpensive unlimited services like the one Boost offers. But Hesse said that the company is already making profits on the Boost unlimited service. He argued that it's easier and less expensive to acquire prepaid customers because they don't have to sign long-term contracts. Prepaid services also help mitigate the company's exposure to customers who rack up large bills and don't pay them, he said.
He added that the key to making prepaid more profitable is reducing the churn rate on this service. And he explained that the unlimited plan has helped do that.
"You get big profit swings on prepaid by improving churn," he said. "We see big changes here with improvements in network quality and the simplicity of our plans. We don't think we can get to post-paid churn levels. But we can get closer. And then we'd expect prepaid to be even more profitable even as we increase capacity on the network."
Getting a grip on the Palm Pre
Sprint also launched the much anticipated Palm Pre during the second quarter. Hesse said he was very pleased with the sales of the device, calling the launch of the device in early June the most successful the company has ever had. But he would not provide specific numbers about how many devices have been sold.
He did say that the early sales of the device were mostly to existing Sprint customers, who were looking to upgrade to new devices. Most of these customers were loyal Palm customers who had been waiting for a new and improved smartphone from Palm. But now, he said the company is starting to stock its non-Sprint retail channels, such as Radio Shack and Best Buy, with Palm Pres, which should help expand the customer base to attract people not yet using Sprint's service.
Hesse acknowledged that the introduction of the new iPhone 3GS on AT&T's network in mid-June caused a slight increase in customer churn, but he said the launch of the Palm Pre and the BlackBerry Tour helped stem the losses.
"When there is a new device launch, like the iPhone, which is a real hero device, we see a blip in increased churn," he said. "So I don't want to lead you to believe there was no impact with the iPhone 3GS. But I think we mitigated the impact with our new devices.
Currently, the Palm Pre is exclusive to Sprint. But that exclusivity is likely to run out at year's end. Verizon Wireless's chief operating officer Denny Strigl announced on the company's conference call earlier this week that Verizon Wireless plans to offer the phone starting in early 2010. Hesse would not comment specifically about when the exclusivity deal with Palm would expire, but he reiterated earlier assertions that the deal will run into 2010.
Despite Hesse's continued assertions that things are improving at Sprint, it appears that investors see the continued customer losses as a negative for the company. The company's stock was trading down more than 9 percent on Wednesday.
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. 
One thing, of many, that is pathetic is that its 2009 and my BAG phone, from back in 1987, worked 100x better than the crap they offer us these days. Its 2009 and they still cant get voice to work. Its 2009 and all they're concerned with is giving new customers deals while treating existing customers like *****. Nothing changes.
500 minutes (Free nights and weekends starting at 7PM)
Unlimited Data
Unlimited Text
But no GPS
Not to mention I cannot upgrade to a decent phone since the release of Samsung Instinct, where Sprint forces SERO users to "upgrade" to a Everything Plus Data plan for $60 with just 450 minutes (with GPS). So why should I pay $40 more a month for a prettier phone?
The only alternative is to get the EPD Family Plan with 4 people which would average out to 400 minutes at $35 (1600 shared minutes at $140). But I'm now paying $20 a month; when it was $25 a month, I was slightly considering paying $10 more for a Pre. Why would I want to pay $15 more or $180 a year more for the Pre? Even if I assume that my $10 discount stays with the account, it still average out to be $32.50 a person, $12.50 more a month; and I'm not even considering the other 3 people.
Understandably, this plan is outright ridiculous and Sprint probably is only making $1 profit a month from me. But, hey, it's not my problem if their system is messed up and their customer service has the perception of being bad. I had a lot of customer service problems when I first started with Sprint, but I called them recently and they solved the new problems quickly and I was fully satisfied with their support. So yeah, their customer service has improved, but the system hasn't!
I have to switch carrier to even port parents' numbers over to my account so we can even get on the EPD Family Plan while keeping our numbers. Port to a prepaid phone, and port it back to Sprint. This is ridiculous, especially if I'm porting to Boost!
Enjoy your Sprint Service.
Because of my work I've carried a second phone with AT&T (when it was AT&T Wireless), Verizon, T-Mobile, and then AT&T (post Cingular take over). I've had tons more issues with those carriers. I liked the convenience of my T-Mobile auto hopping onto Rodgers and Orange (international) but the phone itself seemed pretty cheesy. Same with my first AT&T. Now I'm using my personal phone for both home and business since I showed my boss that my Palm Pre and everything plan means no more overages of any kind whatsoever. (don't worry, I had my IT & HR departments sign a form acknowledging the phone number belongs to me - plus I have them reimburse me directly, not the carrier). Anyway, just a few random thoughts ...
I have had Sprint for many many years because they beat almost every other carrier in Chicago but they've gotta step up and provide some serious devices soon or they'll see more and more subscribers slip away. It wouldn't be a bad idea to take a page from a company like Orange or O2 in the UK. Make the hardware easy to get (affordable) and make your money on the plan. Or better yet give new phones to current and new customers for the same price. That would be an industry first in America. Why should loyalty be punished?
Come on Sprint! I'm rooting for you! Just get it going already. Oh, and they could do with an easier to navigate website for current subscribers, because, I mean, damn, it's 2009 and all.
I left Sprint after the huge disaster that was the Samsung Instinct. Sprint's support for the Instinct was a failure of epic proportions. Each update actually made the phone worse than the previous. Several times the updates were so bad that they had to be rolled back and you were downgraded to the previous version.
I had so many problems with the Instinct that I finally gave up and went to AT&T for the iPhone 3G S. It's only been a little over a month, but OMG what a difference. I know a lot of people complain about AT&T, but apparently those people have never been on Sprint. Sprint's customer service was absolutely dreadful. It wasn't until I actually called to cancel my phone that I actually got a person with intelligence. The guy was well spoken, polite and seemed to be intelligent which was a first for me when dealing with Sprint. Previously I could have swore that Sprint had outsourced their support to some prison labor camp in the middle of South Carolina.
I am well aware that network service varies by city to city, but where I live, AT&T obliterates Sprint's coverage. I have not encountered any dead zones yet, where with Sprint, there were several close by that I always hit. Also, network speed, AT&T is much faster than Sprint in my area.
After around 9 years with Sprint, I now wonder why I didn't switch sooner. Although as much as I love my iPhone, I am incredibly displeased with Apple's constant rejection of great apps. W T F Apple?
At this point, not only does Palm have to compete against the halo effect that the iPhone has, they also have to compete in terms of real dollars. I know they're struggling financially, as is Sprint, but when you can get a similar phone for half the price at AT&T or a similar phone with twice the capacity for the same price on AT&T, it's not hard to see why AT&T is gaining subscribers and Sprint is losing subscribers.
Sprint -Basically works fine if you are near any mayor city and highway (they used to have a lot of problems, specially with roaming issues). 3G works fair to good (No so good on the Metro area at peak times). Customer service has improved A LOT (but they still need to shape up a little more).
AT&T -Has a similar situation, but they have more voice coverage and less 3G coverage. They used to lag a lot (3 to 6 months) to introduce new phone models, but these day are basically lack of inventory for the latest models (which is basically the norm).
T-Mobile -(from Suncom to AT&T to Suncom to T-Mobile, like that Simpons episode), has a very good coverage area (possibly by using some of the AT&T towers). They don't offer 3G yet, but they keep saying that is comming soon. Well, at least they have their latest phones available.
Claro -(if you believe that Verizon is (or is not) evil, well... they decide to sell the phone and cell operations to America Movil...) They are currently replacing their CDMA network (still in operations due to Verizon contractual obligations and some FCC requirements) for a GSM network (which America Movil is based upon), which causes a lot of problems for customers. Customer services is not good at its best. They used to have a nice coverage, but right now is basically ask for good luck trying to connect inside their own network, and a miracle to some other carrier. 3G is a fine mess (It was better than Sprint on CDMA, but slower on GSM).
Centennial -(about to be take over by AT&T) Has better coverage that Sprint (and posibbly they are providing roaming for Sprint) and a nice 3G network, however it is quite saturated on some cities.
OpenMobile -used to be Telefonica Movistar, but they went belly-up and reform into OpenMobile. A concept like Ocean or Boost (prepaid, all you can eat service). Good coverage, with some dead spots, and a no so fast data network.
There also a nice set of prepaid cell services (Virgin Mobile, Net10, Tracphone) that works fine, depending on the carrier.
As you notice there are SIX carrier in a island not larger than Connecticut. And there is the catch that PR has a lot of mountains, which puts the antennas to work at full power (which will also explain why the cell battery lifespan and duration is about half of what it says on the owners manual).
when a phone is not receiving any cell tower signal or is on the network with a weak signal from the cell tower, the phone automatically switches to a higher transmit power and therefore uses up its battery charge faster; just as you say in your last paragraph.
When the local tower where I live had a power failure once, my phone battery died out in the evening because it was trying to connect to any other cell tower and using full power (600mw I believe) to do so and the battery died out. Normally I get 5 bars at home and can go into the next day before having to recharge my phone
TLDR
Sprint is terrible, but so are ATT, Verizon, and everyone else just Sprint moreso.
Sprint CDMA is different technology than Nextel iDen networks
- by ArsFragica July 29, 2009 1:01 PM PDT
- im not surpised with the shiztty commercials of the palm pre that doesnt make no dam sense that they dont get any good bizniz
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