Sprint 3Q16 earnings show postpaid hopes, prepaid dread
If you’re a prepaid carrier and not T-Mobile’s MetroPCS, you’re probably losing out big to said MetroPCS right now. Several victims of that rout come under Sprint’s umbrella of brands.
Churn at Virgin Mobile USA, Boost Mobile and other affiliate prepaid services has grown to 5.8 percent. The combined bloc of carriers netted a loss of 501,000 subscribers for the company’s third fiscal quarter, slightly worse off from the 491,000 dropped last year.
That’s the bad news. The good news? While postpaid connections grew some 20 percent slower than last year, new phone purchases slightly outperformed at 368,000 buys — the best number in four years. Combine that with a cost-cutting regime that has taken $1.6 billion off the budget and aggressive budget imaging with Verizon’s former adman results in Sprint getting $8.5 billion in overall revenue (up over 5 percent) and operating income of $311 million. With debt and interest payments, the company racked a $479 million loss — 43 percent better than a year ago, though.
A consolidation of prepaid connections for the purposes of accounting for churn and retention has reduced the prepaid subscriber base by 1.23 million and proved a marginal hit to affiliate connections. With that, Sprint effectively lost 678,000 subscribers and has slipped to a base of 59.52 million.
The big picture from Sprint and investors is that there’s a win to be found here. But with average per-user revenues in postpaid slipping below $50 for the first time thanks to a service package race to the bottom with Unlimited Freedom — the device installment revenue has helped overall bills creep up — and a slow makeover in prepaid, it’s clear that there’s a lot of work to go.
Still, there’s continued hope somewhere for Overland Park. Maybe in a merger or acquisition outlay with not necessarily content players, but another carrier.
“From a policy perspective, it would seem to make sense that over the long term, further consolidation among the small players may be necessary to compete with the big two,” said CFO Tarek Robbiati. “But it’s early days and we will monitor that situation closely.”