Sprint: 7 worries about its ability to compete

Sprint: 7 worries about its ability to compete

Summary: Sprint has some positive momentum and its fourth quarter results tell the tale. The catch is that there are some serious potholes ahead.

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Sprint's fourth quarter results highlighted the company can move in the right direction---even though it's still reporting losses---and can aggregate customers on its network. But Sprint's future risks highlight why the company was hot for acquiring T-Mobile.

First, the good news. Sprint reported a fourth quarter net loss of $1.04 billion, or 26 cents a share, on revenue of $9.14 billion. It's hard to see how a loss that big is a good think until you consider that Sprint was expected to lose 33 cents a share.

Meanwhile, Sprint had 53.9 million subscribers with 682,000 net additions and 58,000 post-paid customers.

Bonehead merger averted: Sprint rethinks T-Mobile pursuit 

T-Mobile closes J.D. Power customer satisfaction gap on AT&T, Verizon

Clearly, Sprint has some mojo, but there are a few issues worth pondering. Among the big ones:

Tablets drove the subscription base for Sprint. Tablets aren't so bad, but those customers inflated the numbers. Sprint CFO Joe Euteneuer said:

As Sprint platform postpaid gross adds were up 3 percent year-over-year we added 466,000 postpaid tablets in the fourth quarter as the introduction of our installment billing option and a popular device portfolio helped us gain meaningful share in the tablet space.

While the tablet net adds were certainly a driver of our total Sprint platform postpaid net adds we also added 157,000 higher revenue-generating smartphone customers in the quarter.

CNET: Best Sprint phones

In other words, Sprint makes more from smartphone customers---especially the postpaid kind.

Sprint won't grow subscribers in the first half. CEO Dan Hesse and other Sprint execs said that they expect postpaid and prepaid losses in the first half of the year with growth in the second half.

The wireless business is slowing. Sprint anticipates taking share with its Framily plan and other service bundles, but the industry is slowing, there's smartphone fatigue and T-Mobile is very aggressive. Stifel analyst Christopher King said in a research note:

We find it difficult to reconcile management’s guidance for taking gross add share, lowering churn and growing ARPU in an environment that consists of slowing industry growth and very large, and increasingly aggressive, competitors.

Indeed, Hesse said he expects churn levels in the first half to "remain elevated."

The competition. T-Mobile is very aggressive with its marketing and plans to poach customers. T-Mobile appears to be going after Verizon and AT&T, but will crowd out Sprint as collateral damage. It's unclear whether Sprint's Framily plan is enough defense.

Sprint's Framily plan isn't a slam dunk. The company's Framily plan is a family plan that includes friends for larger data discounts. Sprint didn't start advertising Framily plans until Jan. 17 so "it's too early to tell" about success, said Hesse, who did note that "early indications are quite strong."

sprint framily

 

Sprint's network buildout hurts word of mouth. It's great Sprint is bolstering its network and LTE rollout. The catch is that it hurts performance and churn. Hesse said:

We have observed an inverse relationship between the network construction impacts and our customers' likelihood to recommend Sprint to others. As the construction dust peaks, the likelihood to recommend Sprint to client declines.

Hesse's bet is that once Sprint's network build is complete customers will turn up. Sprint will have to also improve its customer satisfaction scores. 

sprint network churn q4

 

Sprint needs to bulk up but has limited options. The T-Mobile purchase for Sprint is complicated and highly unlikely. However, Sprint has to grow if it wants to compete with Verizon and AT&T. Sprint is in a tough spot and a big merger is increasingly unlikely.

Topics: Networking, 4G, Mobility, Telcos

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8 comments
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  • Sprint's basic problem

    is not one of new subscriber plans. Their problem is one of poor service, brought about by inferior coverage and the hubris of the people who work there.

    What other company in the public memory has had the temerity to "fire" customers? Well, Sprint did, because their customers demanded a better level of service - both from the towers and customer care agents. The history of Sprint's hubris is a long one, going back to its inception in wireless. They always had a line about their service being better, yet it was always inferior, but it was easy to tell that they, at some delusional level, believed what they said. There have never been apologies for poor coverage, just excuses. There has never been an apology to the many people who were "fired" {btw, I was not one of them, having had the good sense to not use their service, as I had seen how poorly they treated their retailers and those retailers' staff} for demanding better service and fewer difficulties dealing with Sprint's woefully inept customer service.

    I rarely have strong feelings about any corporate entity, but Sprint is one of those companies that deserves to die a quick, ignominious death.
    chrome_slinky@...
    • Bad decisions

      I would not blame hubris. I blame poor decision making and ineptitude. WiMax and Nextel were hug setbacks and are major reasons why Sprint's network and devices are inferior to the others. TMobile is an incompatible network and they still want to acquire them and, perhaps, flush TMobile's momentum down the toilet. Ineptitude and bad decision making....
      flyguy29
    • Here here!

      Having experienced Sprint's poor service first hand, I will never do business with them ever EVER again, and, over a year later, continue to talk crap about them at every opportunity. Enough said!
      CarenRox
    • Actually...

      ...Sprint's service has always been good, at least in metropolitan areas (with a few dead spots) and along Interstate corridors. What they've had problems with is tech support.
      John L. Ries
  • Sprint can grow

    If it offers a better Clearwire service.

    Unlimited Internet on the go is the key.

    If they aggressively pursue this, they can take a chunk of customers from Verizon, Comcast, AT&T. and create a new segment with room for growth.

    Though since they took over Clearwire, prices have come up and service had gone down. I'm considering terminating my accounts and that's less money they will have.

    On the other hand, consider that T-Mobile offers up to 30+ mb transfer rate and 10$ per gb. I would assume that by Sprints next price hike, T-Mobile would become a lot more competitive with better service it would become a considerably better alternative.

    Sprint has little time to react, next year will probably be too late.
    Uralbas
  • I hated Sprint a year ago, but today as they've lit up the 4G towers...

    I live in a city that was one of Sprint's first to go 4G... The first six months I was among those going to their official forums and complaining. Sprint's response was "more towers will be lit up, give us time". Well a year later I can say things are much, much better here in Houston. I'm happy with my plan, service and phone choices and would actually recommend them.
    Jeremy Deats
  • Love Hate Relationship

    Sprint has never really been known for its good customer service, obviously. Several years ago, I subscribed to Sprint's services and moved shortly after doing so. When I moved, it was to a more populated area, so I mistakenly expected better coverage. I say "mistakenly". Coverage was non-existent, mainly because of the surrounding sand dunes in which I lived, which all but ate radio signals of all kinds and all bands. I contacted Sprint, let them know that I was going to terminate my contract, but only because of lack of service. The support person agreed that I should not be held responsible for my end of the contract, if their services did not work in my area. All I had to do was to pack up the 3 phones I had purchased at the onset of the contract and all would be forgiven. I packed up the phones, sent them in... and have been harassed ever since, by Sprint wanting $500 that I mysteriously and suddenly owe them. I loved their plans and their services, but their customer service is lacking, if only because they have a hard time living up to the deals that they, themselves, make. They will tell you one thing... and stick you with another. No business can survive if those are the plans they implement.
    dharvell
  • SPRINT IS THE WORST MOBILE COMPANY IN THIS GALAXY!

    I was on sprint for about 5-years.

    Please break out your dictionary now... Sprint customer service reps are reprehensible, abyssmally ignorant, apathetic, inpolite, vulgar, insignificant, and demonstrably under qualified to feed pidgeons on the street... let alone attempt to interact and conduct business with civilized human beings as an occupation!
    orandy