The third largest U.S. national carrier Sprint (S, Financial) came out with its third quarter 2014 earnings on Thursday. While the company beat revenue estimates, it recorded worse than expected net loss due to a big one time unexpected charge. However, the telecom provider was able to add subscribers in all product categories. Here’s a lowdown on the quarterly performance of the company.
The quarter in a snapshot
For the quarter ended December, Sprint recorded a revenue of $9 billion, beating analyst estimation of $8.7 billion. However, the company’s bottom line took a hard beating, reporting a net loss $0.60 per share compared with analyst expectation of a loss of $0.24 per share. Sprint had to account for an impairment charge of $2.1 billion that pulled down the bottom line by $0.54 a share. This was partially offset by a tax credit of $0.18 per share.
The company’s ARPU came in at $27.12, which is an improvement of 1% year on year. Postpaid churn rate for the quarter increased from 2.07% a year ago to 2.3%. It’s important for the wireless player to check its high churn rates. As suggested by certain indicators, company CEO Marcelo Claure looks confident to control higher churn rate in 2015.
Picture courtesy: Wikimedia Commons
Customer addition vis-Ă -vis competition
Strong customer growth was the highlight of the quarter. The company added nearly 1 million direct subscribers, which is twice of what it added in the year ago quarter. Around 30,000 of the new connections were postpaid subscribers, and about 410,000 were added to the prepaid subscriber base. This is actually relieving news for the company as well as its investors. The carrier has been losing customers to fellow peers from a very long time. T-Mobile (TMUS, Financial), in particular, has been a big challenger with its non-carrier approach.
The Kansas carrier’s customer loss has been so severe that there over the past several quarters that it sees an impending risk of losing the third spot. There are good chances that T-Mobile with its current rate of customer addition is not far behind to overtake its closest larger rival to become the third largest American telecom provider.
Picture courtesy: Wikimedia Commons
So it’s a rough patch for Sprint. While it is trying to edge closer to the big two, Verizon (VZ, Financial) and AT&T (T, Financial), it’s more important for the company to protect its current position from T-Mobile. In its latest quarter, Verizon saw subscriber addition of 2.1 million, and of this, 672,000 were net postpaid customers. Dallas-based AT&T also saw decent customer addition of 1.9 million. T-Mobile gave the greatest surprise and stole a march on its peers by adding a massive 2.1 million customers in the fourth quarter of fiscal year 2014. Now this is noteworthy, particularly considering its size and sale. Also, this was the seventh quarter in a row that the company added more than 1 million customers to its subscriber base.
Taking into perspective the kind of customer addition Sprint’s fellow peers are drawing, the Kansas carrier is clearly lagging behind. But the latest quarter has brought some hopes. Marcelo Claure is encouraged regarding the progress the company’s made in the latest quarter:
Sprint is working to become more aggressive to fight competition more effectively. The company is stressing on enhancing customer experience, retaining subscribers, acquiring new ones and making the network better.
Investing for growth
During the quarter, the company spent $1.8 billion as capital expenditure on its network vision. Capital spending in the final quarter of the fiscal year is expected to increase. Free cash flow came in negative at $1.8 billion, but was better than a year ago quarter when the company recorded $2.8 billion in negative. The improvement in cash flow was a result of higher cash from operations and lower capital expenditure.
The momentum Sprint has tried to generate in fiscal year 2014 should help the company going forward and form a foundation for its future activities. The company’s vision is to create a great network, have quality offerings, and keep customers happy. Right now it’s testing times for the carrier, but with persistent effort and proper execution of plan the company should see brighter days in the long run.
