Beware! Sprint Is Losing Customers.
Adrian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A quick analysis of the latest quarterly results of Sprint (NYSE: S) and more specifically of page 4 of the Third Quarter 2012 Results gave me a very disturbing image of what is actually going on with Sprint’s customers.
Even though the company states on page 5 of the same report that they had a net loss of subscribers of about 423,000 and tells us is because of the shutting down of the Nextel platform that is scheduled to happen in its entirety by June 2013, I see a different picture just by reading through their report.
Let me guide you through what I see; first, Sprint says on page 4 that;
“The Sprint platform added 410,000 net postpaid customers during the quarter. The Nextel platform lost 866,000 net postpaid customers in the quarter. Sprint platform postpaid net additions and Nextel platform postpaid net subscriber losses include 516,000 net subscribers from the Nextel platform acquired on the Sprint platform.”
That’s an impressive wordplay from management. They are actually telling us that losses on subscribers on the Sprint platform are happening, it’s just they use different wording. Here is how I see it; Out of the 866,000 subscribers that were lost on the Nextel platform (due to the shutdown of Nextel) 516,000 went to the Sprint platform (“recapture” as they call it), however, only 410,000 appear as net additions for the platform. In other words, without the recapture, the Sprint platform would have showed a loss of 106,000 subscribers.
Not only that, they continue to play remarkably well with the wording. They go on to say:
“The company added 19,000 net prepaid subscribers during the quarter, which includes net additions of 459,000 prepaid Sprint platform customers, offset by net losses of 440,000 prepaid Nextel platform customers. Sprint platform prepaid net additions and Nextel platform prepaid net losses include 152,000 net subscribers from the Nextel platform acquired on the Sprint platform.”
That translates into this; 440,000 prepaid subscribers were lost on the Nextel platform and we were able to recapture 152,000 and translate them into Sprint prepaid subscribers. Despite that, we are only able to show 19,000 net additions on the Sprint prepaid platform which actually means that without those who were recaptured we would have shown 133,000 net losses on the prepaid Sprint platform.
I am yet to finish a deeper analysis on the company but as I was reading through their financials I felt compelled to write about this and tell you what can be read between the lines. Although the prospects of Sprint may seem good on the long run, we must beware of the road ahead of us and avoid what can turn out to be a big red flag on their condition.
Sprint has yet to finish shutting down the Nextel platform, and that will mean another 3.1 million subscribers (that, as of the time of their 3Q12 financial report were still active in their books) will leave the company. Weather they continue their recapture rate of 59% or more, that’s yet to be seen. However, I would like to start seeing a high retention rate of Sprint platform customers rather than recaptures of the Nextel platform.
This task can be especially hard to achieve even though they are currently considered the third largest mobile carrier of the U.S. only behind Verizon (NYSE: VZ) and AT&T (NYSE: T). Sprint actively promotes their “Truly Unlimited Data” which is aimed to diminish their competitors as we can see on their website.
Nonetheless, I believe it is only a matter of time before consumers realize that there’s no point of having “unlimited” data if the speed is so slow that one can’t use too much of it before despairing and stop using it. Also, a regular person rarely uses more than 1GB per month (this is because many of us rather use Wi-Fi when available for a faster connection, therefore using less data from the cell company). So, if we were to compare plans for truly used data side to side with Verizon per say, we will find a cheaper option and a faster connection on Verizon than on Sprint.
Before I say good bye, I must embarrassingly admit to be a Sprint customer myself and one who got in a 2 year contract about 4 months ago. I am sincerely thinking about the possibility to pay the early termination and move to Verizon or AT&T because of the speed I encounter and the data I truly use.
A deeper analysis on Sprint will be published in a couple of days. If you want to read it as soon as it becomes available please subscribe to my posts on the top right of this page.
More from Adrian Gomez:
- Beat the Market With Buybacks
- The Fiscal Cliff Won't Stop Facebook From Soaring
- It's Just too Early to Judge!
adriano22 owns shares of Sprint Nextel. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!