April 24 Sprint Nextel Corp, an acquisition target of both Japan's SoftBank Corp and Dish Network Corp, on Wednesday posted a smaller-than-expected quarterly loss, but its customer growth suffered as its Nextel network winds down.
While Sprint, the No. 3 U.S. mobile service provider, recorded higher-than-expected revenue, it said the Nextel network shutdown was also stunting growth in its remaining network because large business customers were leaving.
Sprint added 12,000 customers to its network, compared with the average estimate of almost 198,000 from five analysts contacted by Reuters. Their expectations ranged from 110,000 to 275,000 net additions.
The company's top priority was to convince Nextel customers to move to the Sprint network ahead of the final shutdown at the end of this quarter. Some Nextel business clients also canceled subscriptions to Sprint's remaining network, Chief Executive Officer Dan Hesse told analysts on a conference call.
Including the Nextel network defections, Sprint lost 560,000 subscribers, compared with the analysts' average estimate of a loss of almost 525,000.
By contrast, top U.S. mobile provider Verizon Wireless, a joint venture of Verizon Communications and Vodafone Group Plc, added 677,000 subscribers in the quarter, and second-ranked AT&T Inc added 296,000.
Macquarie analyst Kevin Smithen said Sprint was also facing tough competition from a new marketing push by smaller rival T-Mobile USA, a Deutsche Telekom unit.
"The AT&T and Sprint results confirm that T-Mobile USA has been taking share in the last few months," Smithen said.
However, he said he was impressed that Sprint's first-quarter loss narrowed to $643 million, or 21 cents per share, from $863 million, or 29 cents per share, a year earlier. Analysts expected a loss of 33 cents per share, according to Thomson Reuters I/B/E/S.
Smithen said Sprint was reducing costs faster than expected from the wind-down of the Nextel network, which is based on an older technology called iDen.
Sprint's revenue rose to $8.79 billion from $8.73 billion. Analysts had expected $8.71 billion.
The company now expects 2013 adjusted operating income before depreciation and amortization to reach the high end of its previously announced target of between $5.2 billion and $5.5 billion, excluding costs of closing strategic transactions.
Sprint's board is evaluating a $25.5 billion acquisition offer from No. 2 U.S. satellite TV service Dish, which has challenged the company's October agreement to sell 70 percent of itself to SoftBank for $20.1 billion.
During a conference call with analysts, Sprint did not comment on the Dish offer but said the SoftBank deal could close as soon as July 1.
Sprint shares were up 0.3 percent at $7.12 in early trading. At Tuesday's close, the stock had risen 14 percent since Dish announced its unsolicited bid on April 12 as investors bet that SoftBank might sweeten its offer.