Sprint Posts Lower Quarterly Loss Than Expected, Betting Future on the iPhone
Sprint posted a narrower loss than predicted during the third quarter of the year, but expects the iPhone to turn around the companies steady decline in contract subscribers despite the expensive intial investment.
Sprint reported a quarterly loss of $301 million ($.10 a share), which is a third of their third quarter losses last year of $911 million ($.30 a share). Also, the loss beat analysts expectations of a $.22 per-share loss for the quarter. During the earnings call Sprint CEO Dan Hesse was optimistic that the iPhone will finally bring some life back into the winded company.
Hesse reiterated that the iPhone 4S broke the carriers single-day and opening-weekend sales records. In fact, the 4S broke the single day sales record half way through the launch day. Sprint customers optimistic about the carrier supporting the iPhone most likely prevented more users from leaving the network. Hesse even claimed the iPhone 4S has attracted new customers, breaking another record for percentage of buyers who are new customers, previously held by the HTC Evo. Adding long-term new customers is encouraging for Sprint who has long attributed much of its growth and new customers to the company’s prepaid subscribers. Sprint added 1.3 million total net customers last quarter, but was down 44,000 contract subscribers.
Sprint paid a dear price to secure the iPhone. Sprint Chief Financial Officer expects the phone to cost 40% more than the normal smartphone. This is most likey attributed to the industry leading subsidies Apple requires from carriers to carry the iPhone.
Hesse confirmed Sprint signed a four-year deal with Apple to provide the iPhone and expects the iPhone to create between $7 billion and $8 billion in new value for the company. Hesse confirmed the additional value, and customer growth are why Sprint is willing to bear the brunt of the initial investment in the iPhone.
Sprint expects net contract subscriber growth to increase year-over-year by the end of the 4th quarter with the driving factor being the iPhone. If this prediction is to come true, Sprint is going to have to sell an insane amount of iPhones during this coming Holiday season. If Sprint is able to offer unlimited data plans for the iPhone through the end of the year and into the next, the potential for massive growth is there. This all relies on the ability of their network to support the massive influx of users.
It appears the rumors of Sprint ‘betting the company’ on the iPhone weren’t too far-fetched after all. The whole iPhone 5 exclusive rumor turned out to be hogwash, but the amount of money Sprint is throwing at Apple over the next four years isn’t any less substantial. Hopefully, for the sake of competition in the market place, Sprint’s gamble pays off.