By Sinead Carew
NEW YORK Feb 11 Sprint Corp Chief
Executive Dan Hesse reiterated his call for consolidation in the
U.S. wireless market on Tuesday after the No. 3 U.S. mobile
operator reported a smaller fourth-quarter loss and subscriber
growth that was helped by tablet sales.
Sprint, which is 80 percent owned by Japan's SoftBank Corp
, has been eyeing a deal with smaller rival T-Mobile US
in order to compete better with market leaders Verizon
Wireless and AT&T Inc.
Hesse declined to comment specifically on the possibility of
such a deal during Sprint's quarterly earnings call, but took
questions about intensifying industry competition.
The executive repeated his argument that the creation of
stronger competitors would be good for consumers, with his
comments coming just days after U.S. regulators expressed
skepticism about the effect a Sprint/T-Mobile union would have
"I believe that further consolidation in the U.S. wireless
industry outside of the big two - AT&T and Verizon because
they're so large - would be healthy for the competitive dynamic
of the industry, would be better for the country and better for
consumers," Hesse said.
Analysts say his case is being hurt by a recent surge in
consumer promotions led by long-time market laggard T-Mobile,
which has provoked price discounts from AT&T. Regulators blocked
AT&T's effort to buy T-Mobile in 2011 to protect competition.
Hesse said T-Mobile's offer in early January to pay
customers who switch to its service was influencing consumer
decisions in its first few weeks.
"A offer that's that rich is going to have an impact on the
market," Hesse told Reuters in an interview, adding that he
hopes he hopes the effect of the promotion will "taper off over
But the executive said: "It's hard to speculate what will
happen in the future out of this."
MORE CHURN EXPECTED
Despite tough competition in the fourth quarter Sprint said
it added 58,000 net subscribers compared with analyst
expectations for subscriber losses. But the improvement from a
third-quarter loss of 360,000 subscribers was largely due to
tablet computer sales according to Sprint, which had previously
depended almost completely on phone subscribers.
While the better-than-expected subscriber numbers boosted
Sprint shares, investors were less excited to hear about how
much of the growth was based on the table subscriptions, which
bring in less revenue for Sprint than smartphone sales.
Sprint shares gave back some of their gains in the afternoon
after rising as much as 8 percent in morning trade.
"The headline numbers look very strong but when you start to
go through it you see that was tablet sales to existing
customers rather than new phone sales," said Credit Suisse
analyst Joseph Mastrogiovanni who noted that phone customers
typically bring in a lot more service revenue than tablets.
Tablet sales also helped to explain Sprint's
better-than-expected profit in the quarter because those sales
are accounted for in a different way than smartphone
subscriptions, according to Mastrogiovanni.
Also, Sprint's growth was still minuscule in comparison to
its rivals. Sprint has been losing customers due to a shutdown
of one network and a massive overhaul of its remaining network
which is degrading the quality of its phone calls.
Sprint executives also said the No. 3 U.S. mobile provider
would see overall subscriber losses and a high rate of customer
defections, known as churn, for the first half of the year, as
it continues the network upgrade.
"During the construction phase, there is a period of
disruption to our network service which manifests itself in
higher voice service drops and blocked calls," Hesse told
analysts. "Voice performance is very noticeable to customers so
heightened blocks and drops contribute significantly to churn."
Sprint expects a gradual improvement in churn and a return
to subscriber growth for the second half of the year.
Sprint said its loss narrowed to $1.04 billion, or 26 cents
per share, in the fourth quarter, from $1.32 billion, or 44
cents per share, in the year-ago quarter.
The quarterly loss per share was much narrower than the
average expectation for a loss of 33 cents per share according
to Thomson Reuters I/B/E/S.
The company said it was helped by savings from the closure
of its older Nextel network in the middle of 2013.
Revenue rose to $9.14 billion from $9.01 billion. The
average analyst estimate was $8.97 billion, according to Thomson
It forecast 2014 adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) at between $6.5 billion
and $6.7 billion, and capital spending of about $8 billion.
Sprint shares were up 3.5 percent or 27 cents at $7.97 in
afternoon trade on the New York Stock Exchange after rising as
high as $8.32 earlier in the session. Its shares have lost
roughly a quarter of their value since the beginning of 2014 as
investor hopes for a Sprint/T-Mobile deal have dwindled.