Mon, May 28, 2012, 6:28 PM EDT - U.S. Markets closed for Memorial Day

Sprint posts deeper 4Q loss on iPhone costs

Sprint Nextel posts deeper fourth-quarter loss on cost of selling the iPhone, network upgrade

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NEW YORK (AP) -- Sprint dug deep into its pockets in the latest quarter to put iPhones in the hands of its customers. The perennially money-losing company on Wednesday posted its largest loss in three years.

Sprint Nextel Corp., once known for the worst customer service in the industry, has made progress on turning its fortunes around in the last few years. But the No. 3 U.S. wireless carrier has still found it difficult to compete with larger rivals AT&T Inc. and Verizon Wireless, both of which sell the iPhone.

So Sprint jumped for the chance to sell the iPhone starting in October, giving Apple Inc. a $15.5 billion commitment to buy phones over four years.

In the October to December period, Sprint activated 1.8 million iPhones in the quarter, compared to 7.6 million at AT&T Inc. and 4.3 million at Verizon Wireless.

Sprint said 40 percent of the iPhone users were new to the company, while AT&T usually reports a figure around 25 percent. That meant the phone helped Sprint post a rare increase in the number of subscribers on contract-based plans, which cost more than contract-free alternatives. It gained a net 161,000 such subscribers in the quarter.

But the cost was steep: Sprint estimated that the phone launch widened its quarterly loss by $630 million, or $350 per phone activated. It buys the phones from Apple for around $600, then subsidizes them to sell them for $99 or $199.

The Overland Park, Kan., company is counting on making that money back over time through monthly service fees, but the example set by AT&T, which has sold the phone since 2007, indicates that the iPhone is no path to big profits for phone companies.

CEO Dan Hesse defended Sprint's commitment to the phone on Wednesday. The October release of the iPhone 4S helped the company gain subscribers. Before Sprint had the phone, every new iPhone launch would make subscribers defect to AT&T, and more recently, to Verizon.

Hesse said the iPhone also spurs fewer calls to customer support, and uses less network capacity than smartphones running Google Inc.'s Android software.

Sprint's total loss for the quarter was $1.3 billion, or 43 cents per share, in the October to December period. That compares with a loss of $301 million, or 10 cents per share, a year earlier.

Excluding one-time charges, the loss was 35 cents per share. Analysts polled by FactSet were on average expecting a loss of 38 cents per share, excluding items.

Revenue rose 5 percent to $8.7 billion, matching the analyst estimate.

Sprint shares fell 4 cents, or 1.6 percent, to close at $2.41.

Analysts say the company faces big challenges in absorbing the cost of the iPhone and of upgrading to its new "4G" data network over the next few years, and the fourth-quarter results represent just the first step in the transition.

Nomura Securities analyst Mike McCormack noted that the company is asking investors to look as far ahead as 2017 for "normalized" financial results, with all the near-term challenges behind it. There's no real way to predict how the company will come out of its transition, he said in a research note.

 

10 comments

  • Jason  •  Oklahoma City, Oklahoma  •  3 months ago
    I'm going to go against the grain from what I'm seeing and say that I think Sprint is the way to go and also a good buy at $2.00 a share.I got into the cell phone game relatively late and when I finally caved in, I was a broke college kid with no credit. Everyone seemed to have AT&T, so that was the first carrier I tried to get on. It's been a long time and I don't remember the exact figure, but they wanted an exorbitant deposit. I paid a $200 deposit with Sprint, so ATT's must've been in the $500 range. I couldn't afford that, and Sprint was the only carrier that would put me on a contract at a reasonable price. This was in 2003. Yes, at one point in time their customer service was atrocious and their phone selection was equally disappointing. I stayed with them bc despite their shortcomings, they were the best value. Had heard too many horror stories from cheaper carriers like US Cellular, and still could not afford ATT or Verizon.My last contract expiration, I told myself I was finally going to leave Sprint. I had purchased a Samsung Instinct a few years back and the Instinct was dubbed "the iphone killer." It was anything but that. The Instinct was a buggy piece of #$%$ and I still ended up buying an ipod touch. So when the time came, I began comparing carrier prices. Sprint still offered a much better value, but I was sick and tired of their #$%$ty phone selection. But at the same time, the EVO had just come out. I went ahead and signed up for 1 more run bc everyone who had EVO's were singing its praises and I found an xmas special for $49 when they were selling for $199.Turned out to be 1 of the best phones on the market thanks to the Android operating system. Despite my past complaints about Sprint. I've never had a problem with dropped calls or slow data. Since getting my EVO, I can honestly say I don't have any complaints. I have a great phone, a great network (in my experience at least), and at a WAY cheaper price than the other major carrier. With the addition of the iphone, they have addressed one of the biggest criticisms against the company. I also think the company made a very smart move by doing this. One of the biggest criticisms against corporations is that they are too focused on quarterly or yearly performance, even at the detriment of long term performance, because corporate bonuses are typically tied to short term performance. It's refreshing to see a company planning for the long haul instead of worrying about their annual stock options. I have friends who are ATT and Verizon customers and they are constantly complaining about their prices, data usage caps, slow data, crappy networks, etc. I can honestly say that I am a 100% satisfied Sprint customer and I think they have FINALLY gotten their #$%$ together after all of these years. I also see ATT continue to raise prices and put data caps on "unlimited users." I don't quite understand why ATT kicks its subscribers in the teeth. I also can't understand why subscribers gladly take it and then come back for 2nds. I tell my friends, "Dude, Sprint has unlimited everything for 70 bucks. Why the f' are you paying 120 bucks a month for slow, limited data on AT&T?"
  • pkeegs  •  3 months ago
    HUH! "uses less network capacity than smartphones running Google Inc.'s Android software" This is a ridiculous statement. A byte is a byte is byte. Does that mean using the internet/email is a pain in the #$& on an iphone, more so than a droid phone so people simply don't want to use their data on an iphone?
  • Vourn is Rad  •  3 months ago
    I wondered what was wrong with Sprint. Now I know with the 6 replies that no one cares.
  • Me  •  Manassas, Virginia  •  3 months ago
    The only reason I renewed my contract with Sprint is because they now offer the iphone. If they pull any shenanigans, I will drop them like a hot potato. LOL
  • peter  •  Dallas, Texas  •  3 months ago
    They are expanding their network more aggressively then ATT. I know when I saw the first I phone edge back in 2007 I was sold and knew this was the future. I bought the phone right then. So to say this company is gone go bust you’re High. I am still with ATT till October. They dropped my unlimited data plan because they said I was tethering. I have to pay $130 for my plan. Which includes 450 any time minutes $20 for text $25 data. ATT can kiss my #$%$ in October. The real unlimited nationwide carrier is Sprint. Don’t put the small carriers into this picture because they are not there when you leave the city. Sprints total unlimited data is about $115 which I will be happy to pay.
  • tim  •  3 months ago
    I am a sprint customer and will leave if they try to raise prices at the end of my contract. I will go to straight talk or cricket now that they have android phones. They say data included, but if you buy a phone that can actually use data (smart phone) they add $10. This was not the case prior to them obtaining the iphone.
  • Ming The Merciless  •  San Diego, California  •  3 months ago
    I switched over to Sprint b/c of the iPhone... good move Sprint! It's hard to go wrong at $2.00/share. Might as well take some of that too.
  • Marry jane Smoke a blunt  •  Atlanta, Georgia  •  3 months ago
    Sprint is a joke as all corporate MGT and sales people work from home goofing off. That is were the money has been getting sucked out of Sprint the past 10 years. We also have the Nextel mess, WIMAX corps , Lightscquare issues and now the I phone will make Sprint lose massive amounts of money. Sprint is going BK and will re IPO pennies on the dollar like GM.
  • Scott H  •  Portland, Oregon  •  3 months ago
    I have been with sprint 6 years and you need to fight with them to give you deals they will work with you. The extra data charge on existing plans is bogus and the service is not even available in areas they charge for. 4g my #$%$ 257Kb sec average.Frustrating that most companies are set on self destruct, Hoping for a federal bailout to bonus eachother like has already happened.
  • tim  •  3 months ago
    iphone is a disaster for the carriers, between iphone and changing to lte sprint is going to go bankrupt. The iphone users will not add to the bottom line and suck up all the bandwidth forcing sprint to raise prices, but will not be enough to save them.
 
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