Sprint Reports Tapered 1Q Loss

Zacks

Leading U.S. wireless carrier Sprint Nextel Corp. (S) reported first quarter 2013 results before the opening bell.

The company witnessed adjusted loss per share of 21 cents in the first quarter, narrower than the Zacks Consensus Estimate of a loss of 35 cents. The results also compared favorably with the adjusted loss per share of 29 cents recorded in the first quarter of 2012. Sprint performed better than our expectation on strong revenue growth and continued focus on the core Sprint platform.

Quarterly revenues grew 0.7% year over year to $8,793 million, missing the Zacks Consensus Estimate of $8,794 million. Declines in the Nextel platform and Wireline revenues restricted growth in the Sprint platform.

Adjusted OIBDA (operating income/loss before depreciation, amortization, asset impairments and abandonments) improved 25.6% year over year to $1,524 million driven by growth in service revenues, low cost of service and operating expenses, partially offset by lower Nextel revenues. OIBDA margin improved to 19.1% from 15.2% in the year-ago quarter.

Segment Results

Wireless operating revenue increased 1.7% year over year to $8,089 million in the quarter.

Sprint lost approximately 415,000 subscribers in the reported quarter, representing a net loss of 191,000 in retail subscribers and 224,000 in wholesale and affiliate subscribers.

The Sprint platform added 12,000 post-paid customers while the Nextel platform lost 572,000. With regard to prepaid subscription, Sprint added 568,000 users while the Nextel platform lost 199,000 customers.

At the end of the first quarter, Sprint had approximately 55.211 million customers (including 31.32 million post-paid, 15.96 million prepaid and 7.94 million wholesale and affiliate) compared with 56.103 million in the year-ago quarter.

Wireless post-paid average revenue per unit (:ARPU) increased to $62.47 from $59.88 in the year-ago quarter, boosted by higher monthly recurring revenue. Prepaid ARPU declined to $26.08 from $26.82 in the year-ago quarter.  

Sprint platform post-paid churn (customer switch) rate was 1.84% in the reported quarter, compared with 2.00% in the year-ago quarter. Sprint platform prepaid churn deteriorated to 3.05% from 2.92% in the prior-year quarter.

During the first quarter, Sprint sold nearly 1.5 million Apple Inc.’s (AAPL) iPhones and about 43% of the iPhone customers were new to Sprint.

Wireline revenues dropped 10.5% year over year to $893 million owing to poor performances by the voice, Internet and cable units.

Liquidity

At the end of first quarter, Sprint had approximately $6,275 million in cash and cash equivalents compared with $6,351 million in 2012. Net debt increased to $16.7 billion from $16.1 billion at the end of 2012. The company incurred capital expenditure of $1,812 million in the first quarter compared with $800 million in the corresponding year-ago quarter.

Guidance

For full-year 2013, Sprint continues to expect adjusted OIBDA in the range of $5.2 billion to $5.5 billion.

Other Telecom Stocks

The largest U.S. mobile service provider Verizon Communications Inc. (VZ) reported first quarter 2013 results on Apr 18. The company posted adjusted earnings of 68 cents per share, surpassing the Zacks Consensus Estimate of 66 cents and improving from the year-ago figure of 59 cents.

Ace communications firm AT&T (T) reported first-quarter 2012 financial results on Apr 23. The company’s adjusted earnings per share of 64 cents were in-line with the Zacks Consensus Estimate. Comparing year over year, the results improved 8.5% from adjusted earnings of 59 cents.

Our Take

We believe that Sprint is focusing on narrowing its losses in the coming quarters on its strong wireless business with reducing churn, improving ARPU and increasing penetration of handsets. In addition, the company continues to benefit from the Network Vision plan and the sale of iPhones that are expected to register new highs in its wireless business.

Sprint currently holds a Zacks Rank #3, implying a Hold rating.

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