Sprint: Customer defections continue; Can Palm's Pre reverse the slide?

Sprint: Customer defections continue; Can Palm's Pre reverse the slide?

Summary: Sprint Nextel showed some signs of improvement in its fourth quarter, but is still losing customers at a rapid clip. Sprint CEO Dan Hesse said the company has "high expectations" that the Palm Pre handset can attract customers to the wireless provider.


Sprint Nextel showed some signs of improvement in its fourth quarter, but is still losing customers at a rapid clip. Sprint CEO Dan Hesse said the company has "high expectations" that the Palm Pre handset can attract customers to the wireless provider. "We are bullish about the potential for this device," said Hesse on Sprint's earnings conference call.

In the quarter (statement), Sprint lost 1.3 million net wireless customers and delivered a churn rate of 2.16 percent, up slightly from the third quarter, but better than a year ago.

Sprint delivered a fourth quarter net loss of $1.62 billion, or 57 cents a share, on revenue of $8.43 billion. In the fourth quarter a year ago, Sprint had a net loss of $29.3 billion, or $10.31 a share, on revenue of $9.84 billion. Sprint reported a loss of a penny a share on an adjusted basis compared to Wall Street expectations calling for a loss of 3 cents a share.

Also see: Palm Pre: Can it trump the iPhone? Will it matter?

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For the year, Sprint reported a loss of $2.79 billion, or 98 cents a share, on revenue of $35.6 billion, down 11 percent from a year ago.

Hesse said the company remains focused on cutting costs and boosting cash flow. Hesse in a statement also added that Sprint has enough cash to meet its debt service requirements through the end of 2010. For 2009, Sprint said that it expects subscriber losses to improve in 2009, but didn't signal that growth is around the corner. Capital spending in 2009 will be flat with 2008 and Sprint expects to generate positive free cash flow.

Although Sprint had a rough 2008, it does seem to be going in the right direction. Sprint has cut its debt load and shared the cost of its WiMax rollout courtesy of a transaction with Clearwire. The big question is whether Sprint can lower its churn rates and actually attract customers.

On a conference call, Hesse hit a few key themes. First, Hesse reiterated that Sprint is improving customer service. He said that customer service improvements have enabled the company to close 11 call centers. Sprint plans to close more in 2009. Hesse also noted that Sprint's 3G service has been touted by sites such as Gizmodo for performance.

Hesse, who has been working hard to improve the company's image, also said that Sprint is being considered by more potential customers. But he also acknowledged customer service improvements "take time in a recurring revenue business" to change consumer perception, especially when Sprint's reputation has been "tarnished" in the past.

The jury is still out whether a new handset from Palm and plans like Simply Everything are enough to convince customers to leave AT&T, Verizon and T-Mobile for Sprint.

Here's a look at Sprint's customer metrics with my notes:

By the numbers:

  • Sprint ended the year with 49.3 million customers, down from 53.8 million at the end of 2007.
  • Credit quality of Sprint's customer base improved throughout 2008 and "prime" customers are 84 percent of the company's post-paid customer base, up from 79 percent a year ago. Sprint had a bevy of sub-prime customers via its Boost Mobile unit.
  • 10 percent of Sprint's customers upgraded handsets in the fourth quarter.
  • Wireless post-paid churn was 2.16 percent, but Boost churn was 8.20 percent, up from 8.16 percent in the third quarter.
  • Average revenue per subscriber $56. Wireless service revenue in the fourth quarter was $6.6 billion, down 13 percent from a year ago.
  • Equipment subsidies was $800 million compared to $700 million in the third quarter and $500 million a year ago. Sprint said: "The year-over-year increase in subsidy is primarily due to the increase in the average cost per handset sold as the company continued to sell a greater number of higher-priced units, partially offset by a decrease in the number of handsets sold."

Topics: Hardware, Banking, Enterprise Software, Mobility, Telcos, Wi-Fi

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  • Service Rules, Not Phones

    As much as I like the new Pre, won't be switching anytime soon. Other providers may have better phones or cheaper plans, but Verizon has always had the best coverage in the areas I travel, and lets face it, without service, even that Iphone is just an overpriced brick in your pocket.
    • Sprint and Verizon share the same coverage....

      Since Sprint and Verizon have a free roaming agreement, you have the exact same coverage on Sprint as you do on Verizon, and faster EVDO if you are on Sprint... at a far lower cost.

      I have seen Sprint's awful customer service disappear over the past year... it is refreshing and they continue to share the best network with Verizon.
      • Help me understand this...

        I may be wrong here, but don't these agreements only kick in in areas where they don't already provide service? Sprint coverage in Michigan (at least the part that I live in) is notoriously horrible, but Verizon (I hear) is quite good. My daughter left Sprint because of this. Despite what others have said, I could not be happier with the coverage that I have had with ATT, both at home, and in my travels through the US, even as far away as Hawaii.
    • Phones can rule too...

      The iPhone is the obvious example. I like the device but AT&T service is poor. I spend most of my time in midtown Manhattan, yet it constantly reverts to EDGE coverage and is generally sluggish.

      Sprint's 3G coverage was much better and voice coverage too (i got a signal in my gym, two floors below ground -- my Tmo BlackBerry and AT&T iPhone get no bars)

      Personally I will be getting a Pre as soon as it comes out.

      <a href="http://blog.unison.com">blog.unison.com</a>
    • iPhone a brick?

      I live in the midwest (Detroit area), and have frequently traveled with my AT&T service to many places. My service was available even in the middle of death valley. I have an iPhone, but I have had AT&T service, and formerly Cingular and SBC mobile for 11 years. I have traveled with many friends, all having different services. Guess whose phone they had to use? My ex-boyfriend tauted Sprint, like it was the service from God. That's until my phone worked in the middle of the desert (making much needed travel reservations), and his didn't. I had Sprint for 11 months (about 8 yrs. ago), and I had more dropped calls in one day than I had in a month with Cingular. When I decided to go back to Cingular; Sprint unfairly charged me a $180.00 early termination fee. I had 1 month left on my contract! My bill was about $50-$70 per month at the time. Why did I not get charged for that one month? Needless to say, Sprint will never get that money, and I will never use their service again.
  • RE: Sprint: Customer defections continue; Can Palm

    Phone service is dismal at best. Coverage is Ok but phone queing is an interesting concept. Others may do it also, but the less you use your phone, the lower you get in the que. Eventually it is where your phone power, due to que position, is virtually turned off !!

    Voicemail, when it gets to you, may include already deleted messages from days and weeks past.

    Text seems to work reasonably timely.

    Long time customer, used to be Cingular, and that was BAD customer service !!

  • RE: Sprint: Customer defections continue; Can Palm

    I, for one, am looking forward to the Pre. I didn't get an iphone because of ATT's rep.
  • I am a current Sprint Customer

    I use around 159 minutes a month, but about twice a year mainly when I go out of town, I use over 600 minutes.

    I choose the 450 minute plan, but when I go over my phone bill goes over $300 for each time I go over 600 minutes.

    I did increase my minutes but now instead of paying $59, I now pay over $90 per month.

    When my contract is up this November, I will be switching to ATT for the roll over minutes, unless Sprint will offer that themselves.

    Which I doubt.
    • Also Current Sprint Customer

      I have a Treo 755p which isn't bad. Sprint, however is not ready for prime time. Cingular/Att was no prize either but they could do simple things, like picture mail.

      If you want to use more minutes than are in your plan, why not call and ask for bonus minutes or ask to purchase them? It's not that hard if you do it as your minutes start getting low/
    • I am a current Sprint customer also

      I also had a $300 phone bill and am looking to switch when my contract is up. I have had a 900 minute plan for 2yrs. and never gone over minutes. Suddenly they say I went over my minutes racking up charges at 40 cents a minute. I am wondering if they were charging me for incomming calls as well. No suppose to on my plan. Can't prove a thing. They won't get me again. Switched to unlimited, but raised my bill from $59 to $99. Not a happy camper
    • call sprint

      I have been a sprint customer since they came to St. Louis I get 1400 mins for 89 dollars and share it on 3 phones he who screams the loudest wins
  • Palm Pre PTT

    I am a Nextel customer who uses direct connect. I also have
    a Palm Tungsten T3.

    If Palm could come out with a Pre that has the Nextel PTT, I
    would get it!
  • RE: Sprint: Customer defections continue; Can Palm

    I have been a Nextel customer for 8 years and since Sprint bought them I have seen the phone service degrade and the customer service is non-existant. They are far more concerned with getting a new subscriber that will be with them for a year or two and move on than taking care of their existing ones. They offer new phones to new signups at $49.99 or free and when an existing customers phone has to be replaced it is $249.99 for a phone or go to ebay. They need to access how they are treating their long time customers or Verizon may have all of them.

    • Same Here...

      When my phone went bad I tried to get a new one and was offered $300 phones dating back to 1994. Now that I'm dropping them, I can't get rid of their calls...I just ask 'where were you when I needed you?'...
    • Their customer disservice is the best at what they do

      After more than a decade as a Sprint PCS customer, they merged with Nextel. Immeidately, and for the next six straight months, they billed me at least $2,000.00 on a less than $200.00 a month plan - one bill being in excess of $6,000.00, $5,200+ of which was for less than 1,000 text messages. I wasted more than 60 hours of my time fighting with them over fixing their mistakes. When the bill arrived with massive overcharges, again, on the 7th month, I canceled my account with them, for cause, and went to US Cellular.

      They still owe me a few thousand dollars, but have me in collections stating I owe them nine hundred and change.

      The demons will be having snowball fights before I go back to Sprint.
      Dr. John
  • RE: Sprint: Customer defections continue; Can Palm

    I think that they can turn it around. If you look at the record of Jon Rubinstein, the Chairman of the Board at Palm, he helped to do the same role at Apple ten years ago, so...

  • Dan@Sprint.com is an autoresponder.

    They're really not trying very hard. The CEO goes on TV and
    says, "hey, tell me what we could be doing better." I think, "I'm
    a long-term unhappy sprint customer and I'm leaving and I'd
    like to let this guy know what, from one customer's
    perspective, needs to be worked on."

    So I write up a nice letter and email it to him. I immediately get
    an autoresponse with an advertisement for random sprint add-
    on "features". WTF, I think to myself. I hear nothing for a
    couple of weeks. Again, wtf.

    So I send the letter again about three times (receiving the
    advertisement each time) and eventually I get a response from
    some regular customer service person asking if he could help
    with the issues I'm having.

    But I'm not having issues and none were in my letter. I say, "I'm
    not having issues but your CEO wants to know why you are
    bleeding customers and I've given you about fifteen reasons
    I've personally experienced and that you need to fix in general
    and I'd appreciate it if you would send the note to Dan."

    I get another autoresponse advertisement in reply.

    Some days later, the same customer service guy tells me that
    no, despite Dan's advertising on TV that he is wondering why
    his company is bleeding customers and gets ranked at the
    absolute bottom of customer service surveys Dan is completely
    uninterested in what the customers have to say.

    "Well", I think to myself, that's just another example of the
    amazing jackasshattery that got the company into this situation
    in the first place."

    So I left. There was no other choice.
    • Dans Response

      while I doubt the CEO said that but if you still have the email from the service rep you should send it to the news outlets. Let them get a personal answer from "dan:
  • 5GB Data caps suck. Sprint sucks

    Sprint is stupid to jump in the same price fixing waters of AT&T, Verizon. Where I was once boasting of how great Sprint was for not giving poor service as to cap data. Turns out they are all the same so why use Sprint on principle alone. Stupid move Sprint you had a great product and now you are the same garbage as the rest.
  • The Pre won't dominate the iPhone

    First, let me make sure you know where I am coming from. I am a HUGE fan of Palm since the early days. I am also a big fan of Apple, even though I no longer own a Mac, and do not have an iPhone.
    The Pre won't challenge the iPhone for a couple of reasons. First, Palm just never seems to market ANYTHING correctly or in a timely manner. Look how well the Centro did last year; imagine if they had come out with a really fabulous launch nationwide. It took them until last Christmas to come out with the "Claus" commercials, which were fabulous, but a year late. Second, how many MILLION people out there already own an iPod? If a small percentage of them decide to move up to the next logical step (iPod as part of your phone), the sales growth will be huge. As competition starts to increase with great new phones, such as the Pre, Apple will lower the price of the iPhone to where a whole lot more people will finally take the plunge.
    I hope that I am wrong on this; I hope that Palm proves they can pull this off, both from a manufacturing AND a marketing standpoint. I just don't have a lot of faith it will happen.