Analyst: Ignore Financials — Sprint's on the Rebound

Sprint Nextel Inc. CEO Dan Hesse today laid out a number of strides his company has made in such area as customer satisfaction, pricing plans and new smartphone models, but preliminary third-quarter results still showed a 9% decline in revenues and a 48% loss in profit compared to a year ago.

What gives at Sprint, then?

Some analysts said the Sprint, the third-largest wireless provider, isn't showing the financial success of Verizon and AT&T partly because the longer-term improvements that Hesse boasts about will take longer for customers and investors to recognize. The solution, they said, is time.

"What is the problem at Sprint? Good question," said Jeffrey Kagan, an independent analyst in Atlanta who follows wireless carriers.

"Perhaps it is the same problem Sprint went through in the 1990s. Sprint lost their way back then and then fixed everything, but it still took a few years before the marketplace changed its opinion. Maybe that is what is happening again," Kagan said. "Maybe Sprint is addressing everything that was a problem, and now the recovery just has to take its natural course, which unfortunately takes time."

Kagan ticked off a list of problems that Sprint is correcting, noting that Sprint's wireless quality on the cell phones Sprint sells is as good as that of AT&T and Verizon.

Customer care has been a problem in the past, but Kagan said Sprint has spent plenty of time and money repairing the damage. Plus, the cost of services for Sprint customers is lower overall than at AT&T and Verizon, he added.

Hesse cited many of the same positive improvements in a third-quarter conference call, although the company's financial results were like the elephant in the room. Revenues of $8.04 million for the third quarter, including all units at Sprint, were a 9% decline from $8.8 million in the third quarter of 2008. Meanwhile, the profit loss of $478,000, was 47% greater than the $326,000 loss of the third quarter a year ago.

Wireless revenues are the lion's share of Sprint's total revenues, and reached $6.9 million in the third quarter, down 8% from $7.5 million in the year-ago quarter.

Against that backdrop, Sprint had a net loss of about 545,000 wireless customers in the quarter, even though Hesse noted that Sprint's year-over-year addition of postpaid subscribers was the best in Sprint Nextel's history.

The quarter ended with Sprint having 48.3 million wireless customers, a combination of customers on various networks. That puts Sprint in a fairly distant third position behind Verizon Wireless at 89 million and AT&T at 81.6 million based on their 2009 third-quarter results.

"Sprint is beginning to attract more customers with the industry's best device lineup and the clarity and simplicity of our offers, seven sequential quarterrs in customer care satisfaction, a network declared to be the most reliable by PC World magazine," Hesse said in a prepared statement.

Sprint launched 16 new cell phones in 2009, including a range of smartphones such as the Palm Pre and Pixi, the BlackBerry Tour and the HTC Hero, Hesse said. He also noted growth in Sprint's faster 4G networks, now in 17 markets, which is expected to spread to 80 markets by the end of 2010.

This story, "Analyst: Ignore Financials — Sprint's on the Rebound" was originally published by Computerworld.

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