Sprint Earnings: Here Are A Few Reasons to Love and Hate Them

Shares of Sprint Nextel (NYSE:S) were sweating some value on Thursday following the announcement of the company’s fourth-quarter and full-year results. Overall, the company came slightly ahead of financial expectations and indicated successful investment in long-term growth strategies, but the happy talk failed to mask a net subscriber loss.

Net operating revenues grew 2.7 percent year-over-year to $9 billion, while net loss per diluted share remained effectively flat at $0.44. This compared to expectations for $8.92 billion in revenue and a loss of $0.46 per share. Some of these losses were attributable to a tremendous amount of investment spending as the company works to overhaul its network. Its Network Vision initiative is in full swing, which pretty much translates into an investment cycle.

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Chief executive Dan Hess said: “Sprint’s strong performance was fueled by record wireless service revenue on the Sprint platform due to year-over-year postpaid ARPU growth and Sprint platform net additions.” This, unsurprisingly, is about as optimistic a take as you can get on the results.

Dec. 31, 2011 Mar. 31, 2012 Jun. 30, 2012 Sep. 30, 2012 Dec. 31, 2012
Revenue ($) in millions 8,722 8,734 8,843 8,763 9,005
Diluted EPS ($) (0.43) (0.29) (0.46) (0.26) (0.44)

Dirty MoneyPost-paid ARPU did increase 4.9 percent to $61,47 as pre-paid ARPU was flat at $26.69, and the Sprint platform did gain 683 net additions. This helped push wireless service revenue for the platform to a record $27.1 billion for the year, but it was overshadowed by declines for the Nextel platform.

That platform lost a little more than 1 million subscribers, bringing total net wireless losses to 337 thousand. This was narrower than the 423 thousand lost in the third quarter, but still a far cry from the 1.6 million gained in the year-ago period. Losses from the Nextel platform were to be expected, but the relatively slow growth on the Sprint platform was concerning. Nextel platform losses declined 21.9 percent quarter-to-quarter, but widened 32.5 percent year-over-year, which didn’t really surprise anybody. However, Sprint platform additions fell 22.6 percent quarter-to-quarter, and fell 71.4 percent year-over-year.

But it was not all bad news. The market reaction was negative, but the report contained plenty of positive information about Sprint’s growth prospects…

Perhaps the most obvious and engaging factoid from the report was that Sprint sold 2.2 million iPhones in the fourth quarter and 6.6 million for the year. Nearly 40 percent of annual iPhone sales went to new customers, which suggested an incredibly healthy and mutually beneficial relationship with Apple (NASDAQ:AAPL).

The company has indicated the iPhone as a key component of its growth strategy moving ahead, and Apple can’t entirely discount Sprint as part of its strategy either. Sprint’s fourth-quarter iPhone sales account for 4.6 percent of Apple’s iPhone sales for the quarter, a small but nonetheless important piece of the pie. As Sprint continues to build out its network and advance its smartphone sales ahead of traditional wireless services, it will only play a more and more significant role in Apple’s sales mix.

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