Sprint Nextel Lost Net 560,000 Subscribers in Q1 Amid Nextel’s Pre-Shutdown Exodus

Sprint Nextel lost a net 560,000 subscribers during Q1, in part because of the continued exodus of subscribers from its Nextel platform. About 1.3 million subscribers remain on the Nextel platform, which Sprint still expects to shut down June 30, said Sprint CEO Dan Hesse Wednesday during a Q1 investor earnings call. Sprint added 12,000 subscribers to its own platform, well below analyst estimates of 110,000 to 275,000 additions. Sprint Chief Financial Officer Joseph Eutenauer attributed the losses partially to exiting business clients on the Nextel network who chose to also cancel related subscriptions on the Sprint platform. The carrier will remain focused on recapturing as many of the remaining 1.3 million subscribers on the Nextel platform as it can, though Eutenauer said earlier the carrier still expects it will only be able to recapture about 40 percent of those subscribers. Costs related to the shutdown will reach $500 million to $600 million during Q2, Sprint said.

Sprint’s Network Vision network upgrade plan ended the quarter ahead of schedule, with the carrier completing work at 13,500 network sites, Hesse said. Sprint had originally planned to complete work at 12,000 sites by the end of March. Zoning for the upgrades has been completed at 32,000 of the 38,000 total sites Sprint plans to upgrade, with construction having already been completed or in progress at 25,000 sites, said Steve Elfman, the carrier’s head of operations. Sprint has now deployed 4G LTE in 88 markets, and expects to have it in an additional 170 markets in the coming months, Elfman said. The carrier spent $1.4 billion on Network Vision upgrades during the quarter -- most of the $1.8 billion it used for capital expenditures. The upgrades should improve the carrier’s subscriber churn rate, Hesse said. “In markets where Network Vision deployment is more fully complete, we are seeing much improved network performance and we are beginning to observe improvements in churn,” he said.

Sprint Nextel still expects to close its deals with SoftBank, Clearwire and U.S. Cellular by July 1, Hesse said. SoftBank wants to buy 70 percent ownership of Sprint for $20.1 billion (CD Oct 16 p1). Sprint holds 51 percent ownership of Clearwire, but wants to buy remaining control of the company for $2.2 billion (CD Dec 14 p15). Sprint also wants to buy PCS spectrum and customers in 31 Midwest markets from U.S. Cellular for $480 million cash. Sprint would buy control of U.S. Cellular markets in Chicago and St. Louis, as well as other parts of Illinois, Indiana, Michigan, Missouri and Ohio. While Sprint is still waiting for federal regulators to complete their evaluation of the SoftBank and Clearwire deals, the FCC Wireless Bureau cleared the U.S. Cellular deal in March (http://fcc.us/10M9nUB).

Sprint said Monday it would form a special committee to review a competing bid from Dish Network that would offer $25.5 billion for the carrier (CD April 23 p11). The committee will evaluate Dish’s bid and decide whether it “is or is not reasonably likely to lead to a superior offer as defined in the agreement and plan of merger with SoftBank,” Hesse said. Sprint officials declined to discuss the deals any further during the call.

Sprint lost a net $643 million during the quarter, a year-over-year improvement from its $863 million net loss at the same time in 2012. The carrier reported $8.79 billion in revenue. Mobile device upgrades made up 6.9 percent of Sprint’s revenue base for the quarter -- a record low, Eutenauer said. The carrier expects upgrades will rise during Q2 as the carrier begins offering new devices like the Samsung Galaxy S4 and the HTC One, he said. Sprint will also begin to see customers upgrade through its 20-month upgrade policy in Q2, which it instituted in Q3 2011, Eutenauer said. Sprint said it will be delaying shipments of the Samsung Galaxy S4 to its stores because of “unexpected inventory challenges.” The carrier will still begin selling the device by Internet and phone as expected on Saturday. The carrier said the shipments would occur “as inventory becomes available.”