Sprint Nextel Earnings Call NUGGETS: ARPU Sequential Growth, Network Upgrade Process

On Thursday, Sprint Nextel Corp (NYSE:S) reported its second quarter earnings and discussed the following topics in its earnings conference call. Take a look.

ARPU Sequential Growth

Philip Cusick – JPMorgan: There is a lot to talk about, but let’s start with ARPU. Joe, you talked about customer credits and it sounds like 3Q could be, I don’t know, flat, down versus 2Q. Can you go into that a little bit more?

A Closer Look: Sprint Nextel Earnings Cheat Sheet>>

Joseph J. Euteneuer – CFO: Yeah, it’s really a success base thing, because we’ve had so much success with the recapture of Nextel subscribers. Then with the one-time change in policy on second line discounts, you had a one-time benefit in the second quarter that then becomes flat for third and fourth quarter. So you have this mathematical calculation that potentially could cause OIBDA, I mean, ARPU to be flat to slightly down, just on the Sprint platform but not for the overall business. So the overall business ARPU will continue to have sequential growth, but we could potentially have flat to slightly down ARPU just for the one quarter in 3Q.

Philip Cusick – JPMorgan: Then that’s a one-time thing in Sprint?

Joseph J. Euteneuer – CFO: One-time thing and then back in the fourth quarter you see – you see the sequential growth back in the fourth quarter. So it’s a very minor thing, what we’ve been trying so hard to make sure we gave you guys all the visibility and we reestablish credibility in our numbers and stuff. We just wanted to give everyone the heads up.

Philip Cusick – JPMorgan: If I can get one more in, you mentioned the tower lease treatment is the smallest help to the Network Vision cost reduction. Can you just remind us what that number is?

Brad Hampton – IR: Yeah, Phil it’s Brad. The change in the tower lease treatment is $85 million of impact to adjusted OIBDA for the full year, $8 million in the second quarter and $77 million for the second half of the year. So, $85 million in total for the year.

Network Upgrade Process

David Dixon – FBR Capital Markets: Terrific results. Steve, I had a question on the network upgrade progress. I’m feeling good about the vast availability in FY’13 supporting both your 800 and your 2.6 spectrum band after good discussions with both Qualcomm and the handset manufacturers. But on the network front, well, I’m hearing good news from Alcatel and particularly from Ericsson on technology front and Samsung in terms of the cluster approach that caused a bit of a lag optically. Based on the thoughts on year-to-date, what’s giving you the confidence that you’re going to hit that 12,000 site target by the end of the year?

Steve Elfman – President, Network Operations and Wholesale: Thanks, Dave. Few good things I’d like to talk about on that. Number one, there is about 700 to 800 sites that are really not on air simply because we – I’m sorry. I’ve just…

David Dixon – FBR Capital Markets: Yeah, we can hear that, Steve.

Steve Elfman – President, Network Operations and Wholesale: You could, okay, good. So we’ve got several 100 sites that are done and ready to turn on and we’re waiting for backhaul fiber basically to the site. We’ve got several 100 others that basically we have birds nesting on them, and once the birds leave we’ll be able to turn those sites on. I’m also bit early in the quarter with one of our vendors, they had backorders on antenna and for a couple of our markets, but that’s cleared now. Most importantly each one of the vendors has really refined their logistics processes, basically getting the product out of country to warehouse to decide (indiscernible) and have ramped up their crews appropriately. So that’s what gives us a lot of confidence and at the same time the key as we said before is getting the pipeline and getting the leasing, getting the zoning, so that and finally, the fact that we started on our key cities early in the year and we’re really ramping up in a new round of cities, which gives a pool of, call it, candidate, sites increases rather dramatically. So that’s what gives me the confidence, Steve.