The third largest U.S. telecom provider Sprint (S, Financial) came out with its first quarter results with revenue topping analyst estimates. The carrier’s been heavily investing in network upgrades from quite some time now to become competitive and effectively contest larger rivals Verizon (VZ, Financial) and AT&T (T, Financial). After such massive investment, is the struggling company showing signs of improvement, or does it need to wait further to reap its benefits?
A Sneak Peek
The company reported better than expected revenue figures on the back of greater high-speed coverage. Sprint registered $8.8 billion in revenue, which is down from last year’s $8.9 billion but higher than analyst expectation of $8.7 billion. During the quarter, net income reported by the company stood at $23 million which was a huge heads-up for the loss making entity. This is the best quarter for the company in the last seven year in terms of net income. Last year in the same period, Sprint had recorded a huge loss of $1.7 billion.
The telecom operator registered an operating profit of $519 million compared with an operating loss of $874 million recorded a year ago. Sprint also made year over year improvement in controlling expenses that also led to margin gains. It managed to check costs related to selling expenses, roaming costs and expenses related to customer care. The Kansas-based wireless provider remains focused on delivering better cost efficiency to deliver higher operating performance.
The company was glad to report that the progress in the network overhaul program was in line with the target set for the middle of the current year. As of now, Sprint provides LTE coverage to 254 million Americans.
Customer Loss
Sprint joined forces with Softbank and accelerated its network infrastructure upgrading process. However, the transition has been quite a tough one for the carrier. Though the third largest U.S. national player touted its network revamp that it believes to have solidified its network base, thousands of customers still complain regarding network issues.
The company’s churn rate stood at 2.05%, reasonably higher than last year’s 1.83%. This is quite evident in the customer losses that the company’s witnessing. The company has lost as many as 181,000 contract customers during the period, which is a big revenue loss. The company made additions of 535,000 postpaid tablets on its network. This gain was set off by a drop of 646,000 in phone customers and 70,000 broadband customers. Sprint’s prepaid platform suffered a total net loss of 542,000 customers.
In an effort to lure customers, and retain existing subscribers, the carrier slashed prices giving them guarantees. The company took this step to serve another purpose. Sprint has been facing increased competition from smaller rival T-Mobile (TMUS, Financial) after it adopted lower plan pricing strategy as its key weapon. Other than cutting prices, Sprint also plans to refresh its service plans and contend T-Mobile. It’s important for Sprint to get quicker and better results as T-Mobile is making dramatic progress.
Departing Thoughts
The quarter gave in some real encouraging figures that suggest that Sprint is gradually creeping into the black. However, continuous customer loss mellowed down positive investor sentiment. This is not deterring Sprint from its commitment towards 4G LTE network expansion program. The company aims to improve customer service with lower dropped calls, better network connectivity, and solid data experience to its subscribers. So let’s keep the company’s upcoming quarter results on our radar, and watch the changes closely to ascertain its progress.
