Sprint Posts Loss Again, Foresees Even More Defections

Samsung's Instinct promoted by SprintStruggling to keep consumers from defecting to other mobile phone carriers, Sprint Nextel posted a third straight quarterly loss of 12 cents per share on Wednesday, compared with net income of $19 million, or 1 cent, in the year-ago quarter.

For the quarter, total wireless customers declined by 901,000--including losses of 776,000 postpaid customers and 250,000 traditional prepaid users, partially offset by gains of 112,000 Boost Unlimited customers and a 13,000 increase in the number of wholesale and affiliate subscribers.

Sprint's wireless business reported a 12.5% decline in revenue to $7.7 billion. In total, revenue during the quarter fell about 11%, to $9.06 billion.

The company predicts higher defections in the next three months, despite Sprint CEO Dan Hesse's efforts to cut prices on services and overhaul advertising campaigns.

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Sprint has been heavily promoting Samsung Electronics' Instinct wireless handset to combat iPhone sales. The company claims the Apple 3G look-alike, along with unlimited voice and data plans, has helped to hold onto subscribers. In July, Samsung reported that second-quarter profits jumped 51% and attributed the increase, in part, to handset sales.

In June, it launched an online promotion for the Instinct that ended Aug. 1.

Analysts say Sprint shows signs of improvement, although the company ended the quarter with nearly 52 million subscribers, down from 54 million a year earlier.

"Sprint says the Samsung Instinct is doing well, but it appears that many of the handsets have been sold to existing customers," says Christopher King, senior telecom analyst at Stifel Nicolaus & Co. "Aside from the Instinct, a lot of the marketing focus has been on the legacy Nextel business, which is good because it's a business they need to invigorate."

Craig Moffett, senior analyst at Sanford C. Bernstein & Co., notes that Sprint's churn is getting better, and margins have improved. A massive cut to capital spending has boosted free cash flow, he says, but the numbers that matter the most--subscriber losses and guidance--suggest that Sprint is still in need of major surgery.

"Sprint's gross additions were simply awful," Moffett wrote in a report. "At just 2.44 million postpaid, they were 4.5% below our expectation, almost fully offsetting the churn improvement and were, astonishingly, a full 32% below the level of last year."

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