Cash-strapped Sprint promises to pinch pennies on network upgrade
As the power of its aggressive promotions wanes, Sprint looks to tighten its belt further and get more bang for its buck on network upgrades.
Discounts alone aren't enough to turn Sprint's ship around. The nation's No. 4 wireless carrier says it needs to spend resources more wisely.
Some of the shine has faded on Sprint's aggressive promotions.
Sprint, which reported earnings Tuesday, has been on a bumpy road to recovery after years of customer losses. Its aggressive promotion of 50 percent off for new customers who switch from AT&T, Verizon or T-Mobile was one of the boldest in the industry, and it helped stop a mass customer exodus. But where does the company go from here?
CEO Marcelo Claure says a better, faster network is one piece of the strategy, as is an expanded retail channel. But he said Sprint needs to be more careful in its spending to get the biggest bang for its buck.
"If you're poorer than others, you have to do things differently," he said on a call with reporters.
The most recent quarterly results from the Overland Park, Kansas, company were a mixed bag. Sprint added valuable postpaid subscribers this quarter while rivals Verizon and AT&T lost such customers, but it still fell short of analysts' expectations. Meanwhile, financial losses continued. Sprint reported its loss jumped to $554 million, or 14 cents per share, on revenue of $8.07 billion. This compares to a loss of $224 million, or 6 cents per share, on revenue of $8.28 billion last year.
"Yes, Sprint added subscribers," said MoffettNathanson analyst Craig Moffett in a research note. "But we could easily argue that a company offering a half-off anyone's best price, in a commodity industry, would be hard pressed not to."
During the quarter that ended March 31, Sprint added only 22,000 new postpaid wireless customers, who pay for service at the end of each month and are considered to be more valuable because they spend more money and have better credit. By contrast, Verizon lost 8,000 such subscribers and AT&T lost a whopping 363,000. But Sprint's modest gains were a far cry from the 877,000 that T-Mobile added. Analysts had expected Sprint to add more than 200,000 such subscribers.
In an interview with reporters, Claure tried to put the numbers in context.
"You've got to see where we are coming from," he said. "We were last when we started this. And we are making massive improvements."
Faster network at a lower cost
But Sprint still has a long way to go. Claure said the company's future lies in its improved network. According to some independent testing services like Nielsen Mobile Performance Data and RootMetrics, Sprint offers faster 4G LTE download speeds in some markets where its "LTE Plus" network is deployed. Still, the company needs to spend its money wisely if it plans to catch competitors.
Sprint has already been on a massive cost-cutting mission, slashing $1.5 billion in spending in the past six months and promising further cuts in the future. Claure said it's done a good job so far by grabbing the "low-hanging fruit." But the next phase of belt-tightening will be more challenging.
At the same time, he said Sprint is planning a massive retail expansion through a partnership with UK-based Carphone Warehouse, in which Sprint and its other wireless brands will be sold at another 2,500 retail stores within the next two years.
"You need to have stores to increase sales," he said. "When a customer sees your store, they are more likely to buy."
He said this has been a major weakness for Sprint with respect to T-Mobile, which has aggressively been adding retail stores over the past couple of years. As an example, he said that T-Mobile today has 27 retail stores in Chicago. Sprint has only three. Sprint will increase that number to 18 to 20 stores in less than 15 months.
"They have much better distribution," he said of T-Mobile. "We are going to fix that."