--Sprint Nextel second quarter loss widens, largely on Nextel shutdown costs
--Customer churn and revenue per user rise
--Sprint is ahead of schedule to meet its iPhone commitment
(Updates throughout with analyst and company comments. Adds details.)
By Thomas Gryta
Sprint Nextel Corp.'s (S) second-quarter loss widened amid the loss of customers and costs involved with shutting down its Nextel network, although signs that its turnaround is continuing were encouraging to investors.
The Overland Park, Kan., wireless carrier is in the midst of a major network overhaul that it hopes will draw new contract customers and help it keep pace with larger rivals that are also rolling out faster service.
While it is bleeding total customers, largely because of the Nextel shutdown, the company reported a strong improvement in retaining others as well as the amount of revenue it draws from current subscribers. The company raised its full-year outlook and noted that it is ahead of pace to meet a large iPhone purchase commitment to Apple Inc. (APPL).
"It turned out extremely well," Credit Suisse analyst Jonathan Chaplin said of the quarterly results. He cited improving organic trends in the Sprint business, improved guidance and a reaffirmation of its targets for its massive network overhaul.
Shares rose 17% to $3.95 in premarket trading. The stock has fallen 35% over the past year through Wednesday's close.
Sprint reported a loss of $1.37 billion, or 46 cents a share, compared with a loss of $847 million, or 28 cents, a year earlier. The most-recent quarter included net charges of roughly 39 cents a share for costs and depreciation from the Nextel shutdown and for an impairment related to an investment in Clearwire Corp. (CLWR). Revenue rose 6.4% to $8.84 billion.
Analysts polled by Thomson Reuters had forecast a loss of 40 cents a share on revenue of $8.73 billion.
The company raised its 2012 forecast for adjusted operating earnings before depreciation and amortization to a range of $4.5 billion and $4.6 billion, above a previous view of $3.7 billion to $3.9 billion. It expects consolidated net service revenue growth for the year of 4% to 6% and capital expenditures of about $6 billion, excluding capitalized interest.
In the quarter, the company showed improvement in capturing customers that are leaving its Nextel push-to-talk platform, with 60% of those being kept at Sprint. A year-ago, that rate was 27% and last quarter it was 46%.
The rate at which customers leave its network, a measurement known as churn, dropped to 1.79% from 2% in the prior quarter. It was 1.75% a year ago.
Sprint reported about 9% of customers upgraded their phone despite stricter policies. The rate was flat with a year ago and up 8% in the last quarter. The increase was driven by device launches and the higher Nextel customer retention.
Overall the company lost 246,000 two-year contracts in the quarter, as a gain of 442,000 in its namesake brand failed to overcome losses of 688,000 at the legacy Nextel unit. Although Wall Street was looking for a total loss of 191,000, Mr. Chaplin downplayed the figure because the Nextel shutdown brings so many losses.
But the company is squeezing more out of the customers it has with average revenue per postpaid user, an important metric, rising to $60.88 from $56.67 a year ago, the biggest increase in the company's history.
The company sold 1.5 million iPhones in the period, with 40% of those coming from new Sprint customers.
The iPhone is both important and costly for Sprint, and those unit sales were unchanged from last quarter. Rivals Verizon Wireless and AT&T both saw sales of the popular phone drop 16% and 14%, respectively, from last quarter.
Sprint first launched the iPhone in October, but it committed to buy $15.5 billion of the devices over a four-year period. That level of commitment was seen as extreme by many; Sprint itself said last year that it likely wouldn't turn a profit on selling the iPhone until 2015.
Sprint's Chief Executive Dan Hesse said on a conference call that the company is ahead of pace to meet its commitment to Apple.
Last month, Sprint began offering the iPhone through one of its pay-as-you-go businesses Virgin Mobile USA. The price is the same as buying the phone from Apple, but allows customers to buy unlimited data at a cheaper price without committing to a two-year contract, as is required to get a carrier-subsidized iPhone.
Hesse said the company wouldn't yet share results from the Virgin iPhone because it is "too early."
--Melodie Warner contributed to this report
Write to Thomas Gryta at email@example.com
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(END) Dow Jones Newswires
July 26, 2012 09:05 ET (13:05 GMT)
Copyright (c) 2012 Dow Jones & Company, Inc.