Sprint Still Losing Money Despite Prepaid Wireless Boost

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Despite seeing a surge in prepaid wireless subscribers last quarter, Sprint continued to hemorrhage money and posted a net loss of $594 million.

Sprint's earnings represented an 18% decline from the $505 million loss that the company posted in the first quarter of 2008. Over the past year the company has seen a steady drop in its quarterly revenues, as its $8.2 billion in first quarter 2009 operating revenues marked a 12% decrease from the $9.3 billion in operating revenues it generated in the first quarter of 2008. At the heart of Sprint's decline has been the continued deterioration of its postpaid wireless plans in which customers pay the carrier after using their wireless minutes every month. This stands in contrast to prepaid plans, where customers purchase a bucket of minutes before using them and can choose to add more after their minutes expire.

In the first quarter of 2009, Sprint lost 1.25 million postpaid wireless customers, an increase of 17% over the 1.07 million postpaid customers it lost in the first quarter of 2008. Additionally, the postpaid segment's churn rate, which had improved to 2.16% in the fourth quarter of 2008, bounced up to 2.25% in the first quarter of this year.

If there was any good news for Sprint this quarter, it was that its postpaid losses were partially offset by a surge in prepaid customers, as the carrier added 674,000 prepaid subscribers in the first quarter of 2009. The company was also helped by an addition of 394,000 wholesale and affiliate subscribers for the quarter, meaning that Sprint's overall wireless customer losses for the quarter totaled 182,000, a sharp decrease from the 1.09 million wireless subscribers it lost in the first quarter of 2008.

Prepaid plans often prove attractive to consumers during a recession because they are less expensive than traditional postpaid wireless plans. However, prepaid plans also generate less money per subscriber than postpaid plans. In this past quarter, for instance, Sprint generated $56 in average revenue per user (ARPU) for its postpaid plans and $31 in ARPU for its prepaid plans.

The past year has been a bad one for Sprint as the carrier not only posted an annual loss of $2.8 billion in 2008, but also lost more than 4 million wireless subscribers and wound up laying off 8,000 workers this past January. Sprint's competitors, meanwhile, all seemed to extend their advantages over the beleaguered carrier. Buoyed by the release of the iPhone 3G, AT&T added nearly 7 million wireless subscribers in 2008 while posting earnings of $12.9 billion for the year, a 7.7% increase over its 2007 earnings. Verizon, meanwhile, added 6.3 million wireless customers while posting a net income of $6.4 billion, a 16.4% increase from 2007.

This story, "Sprint Still Losing Money Despite Prepaid Wireless Boost" was originally published by Network World.

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