NEW YORK (Reuters) - Sprint Nextel (S.N), the No. 3 U.S. mobile service said customer defections slowed, sending its shares up 3 percent, despite posting a wider loss.
While the company still has a lot to do to regain ground lost over several years, analysts were encouraged it slowed losses of valuable long-term customers and saw growth from budget-conscious customers who pay in advance.
“People were looking for it to show improvements and it did. There’s still a lot of heavy work ahead of them but they’re moving in the right direction,” said Roe Equity Research analyst Kevin Roe.
Sprint lost 578,000 postpaid monthly-bill paying customers who sign long-term contracts, slightly better than the average expectation for 623,574 losses from six analysts contacted by Reuters and much better than 1.25 million losses a year earlier.
Chief Executive Officer Dan Hesse said Sprint’s progress helped stunt first quarter postpaid growth at bigger rivals AT&T Inc (T.N) and Verizon Wireless, Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L).
“That’s the biggest driver in their reduction, Sprint’s improvements.” Hesse said in an interview. He added that Sprint’s progress was even more impressive because of signs that the overall postpaid market growth was shrinking.
Hesse promised second quarter improvements in postpaid customer cancellations from 2.15 percent in the first quarter.
He did not give specific targets but said the decline would come from an increase in the percentage of customers buying multiple services as these are least likely to leave.
Sprint’s net loss widened to $865 million, or 29 cents per share, from a year-earlier loss of $594 million, or 21 cents per share. Before tax related charges, its per share loss of 17 cents met analysts’ estimates, Thomson Reuters I/B/E/S said.
Hesse also promised Sprint’s service offerings would broaden in the next few weeks for prepaid customers who pay for calls in advance but do not sign a contract.
Prepaid is currently the main growth segment in the U.S. wireless market as customers increasingly look to economize.
As a result, Hesse said Sprint, which bought prepaid wholesale partner Virgin Mobile USA in 2009, expects an increase in prepaid growth in the second half of 2010.
Sprint added 348,000 prepaid customers in the first quarter compared with estimates ranging from a loss of 300,000 to a gain of 330,000 from five analysts Reuters contacted.
Sprint’s head of prepaid service Dan Schulman suggested that the new prepaid offers would not likely include price cuts.
This could be a relief for Sprint’s competitors in prepaid including America Movil’s (AMXL.MX) Tracfone as well as Leap Wireless LEAP.O and MetroPCS Communications PCS.N as the sector has seen a lot of discounting in the last year.
Sprint’s revenue fell 2 percent to $8.09 billion from $8.21 billion, but was ahead of Wall Street expectations of $8.05 billion. It said that revenue stabilization to be an important factor in the company’s turnaround this year.
Sprint, which lost 75,000 total customers in the quarter, including prepaid customers, repeated its previous forecast that subscriber losses would improve in 2010 versus 2009.
Sprint shares rose to $4.22 in morning trade after closing at $4.09 on New York Stock Exchange the day before. The shares have already risen 30 percent since around mid February.
Editing by Lisa Von Ahn and Derek Caney