February 11, 2014 / 12:21 PM / in 4 years

Sprint reports smaller fourth-quarter loss; subscribers increase

NEW YORK (Reuters) - Sprint Corp (S.N) reported a smaller fourth-quarter loss than estimated and an unexpected increase in wireless subscribers, sending its shares up 7 percent in early trade.

The company, which is 80 percent owned by Japan’s SoftBank Corp (9984.T), said it added 58,000 net subscribers in the quarter compared with the average expectation for a loss of 83,500 subscribers from six analysts contacted by Reuters. Estimates ranged from a loss of 48,000 to a loss of 400,000.

“We would characterize these results as better than feared,” said Wells Fargo analyst Jennifer Fritzsche.

However, the growth was still minuscule in comparison to rivals Verizon Wireless (VZ.N)(VOD.L), AT&T Inc (T.N) and T-Mobile US TMUS.N. 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 said the No. 3 U.S. mobile provider would continue to see a high rate of customer defections, known as churn, in the coming months, as it continues the network upgrade and warned of a subscriber loss for the first half of the year.

“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,” Chief Executive officer Dan Hesse told analysts on a conference call. “Voice performance is very noticeable to customers so heightened blocks and drops contribute significantly to churn.”

Chief Financial Officer Joe Euteneur added that the company would report customer net losses for the first half of the year and growth for the second half of 2014.

The problems come at a bad time for Sprint because of heightened competition in the U.S. wireless industry as both T-Mobile US and AT&T have been ramping up promotions aimed at stealing their rivals’ customers.

“It is having some impact out there in the market,” Hesse said on the conference call.

Hesse declined to comment specifically on speculation that SoftBank wants to buy No. 4 U.S. mobile operator T-Mobile to merge it with Sprint but repeated previous comments suggesting that such a deal would be good news for the industry.

“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.

He was speaking just days after U.S. regulators indicated that they would be skeptical of a Sprint/T-Mobile US union.

LOSS NARROWS

    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 Reuters I/B/E/S.

    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’s subscriber growth, which compared with a loss of 360,000 in the third quarter, included growth in connections for tablet computers and smartphones.

    Sprint shares rose to $8.26 in premarket trade after closing at $7.69 in the regular New York Stock Exchange session. Its shares were still down 23 percent since the beginning of 2014 as investor hopes for a Sprint/T-Mobile deal dwindled.

    Editing by Jeffrey Benkoe, Chizu Nomiyama and James Dalgleish

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