Sprint (S, Financial)'s share prices zoomed 10% to $8.19 after the carrier released its first quarter earnings yesterday. Although the earnings continued to remain in the red, the fact that loss shrunk drastically came as great news to the investors. The Kansas carrier is busy in upgrading its network to 4G LTE and increasing nationwide coverage to catch up with larger rivals. The quarter results would be a good indicator of how efficiently the company is moving towards its goal of emerging as a stronger national telecom player.
Talking in Numbers
Sprint recorded revenue of $8.9 billion during the quarter, up 0.9% from last year. It expects the revenue per user to increase as more and more customers may get attracted to buy tablets, shift to upgraded plans, and get insurance plans.
The carrier registered quarterly loss of $151 million. This is a vast improvement of 77% over last year’s comparable period when it recorded a loss of $643 million. The company’s operating income also came in much better for the quarter as it multiplied more than 14 times the amount reported last year. Operating income went up to $420 million against the tiny figure of $29 million recorded in the year ago quarter.
The Twist
Now what’s surprising is the fact that the company lost 383,000 net subscribers during the period. This turns out to be pretty odd considering that losses came down dramatically. Why did the company lose so many customers? Sprint is in the process of upgrading its network infrastructure due to which there are instances of network disruptions. Such interruptions and disturbance during the network overhaul process caused several subscribers to move to rival networks of AT&T (T, Financial), T-Mobile (TMUS, Financial) or Verizon (VZ, Financial). But this will not happen for long, as the most of the upgrading would be done by the middle of this year.
Offering Sparkling Services
The third largest U.S. carrier by subscriber base has grown really ambitious post its association with Softbank. To pull up revenue numbers, Sprint is focused on giving better plans and option to its subscribers. The Sprint Spark Service claims to offer wireless speed of 50 megabits to 60 megabits a second. The carrier plans to bring this service to six more cities that would increase its availability to 24 cities in the U.S. The telecom player proposes to deploy this in around 100 largest cities of the country over a period of three years.
Sprint recently introduced Sprint Framily Pricing plan (for friends and family) during the quarter and is receiving good consumer response. The plan allows users to add up to a maximum of 10 family members or friends in a single package. Since this comes out very reasonable for families, three million people joined in the very first quarter of introduction. This offer is part of Sprint’s strategy to compete with the innovative offerings of contenders AT&T and T-Mobile.
The Talk of the Town
Sprint’s interest in acquiring T-Mobile is the new hot topic in the wireless space. The company believes that a combination with the fourth largest carrier would create a stronger combined entity to fight the growing duopoly of Verizon and AT&T. But the deal is facing antitrust issues as regulators don’t want the industry size to decrease to three national carriers, down from four.
Sprint’s chairman Masayoshi Son has tried to convince the FCC and the Department of Justice that the deal if approved would have a positive bearing on the wireless industry. There would be a stronger contender to compete the bigger fishes.
Last Thought
The crux of the story is that the carrier is working hard to get in the right track and reap benefits of the increasing data usage. Its effort of introducing competitive plans, and upgrading network infrastructure would pay off better if the combination with T-Mobile receives a green signal from the regulators. As of now we can only watch and watch what’s in store for the Sprint.
