Sprint Nextel Corp. (NYSE: S), the third-largest U.S. wireless carrier, reported higher revenue and a slightly narrower loss than analysts had estimated, bolstered by increased use of smartphones.
The fourth-quarter net loss was 44 cents a share, Overland Park, Kansas-based Sprint said today in a statement. Analysts had predicted 45 cents on average, according to data compiled by Bloomberg. Sales rose to $9.01 billion, compared with an average estimate of $8.93 billion.
Sprint has been improving its network and offering more smartphones, part of an effort to catch up with Verizon Wireless and AT&T Inc. (NYSE: T) Its sales of Apple Inc.’s iPhone, which Sprint added to its network last year, reached 2.2 million last quarter, with 38 percent coming from new customers. While smartphone sales hurt profit in the short term because carriers subsidize them, the devices encourage subscribers to use more data, helping increase revenue in the long run.
The company’s focus, and that of its investors, is on its long-term turnaround efforts rather than on short-term results. Sprint is selling 70 percent of itself to Japanese carrier Softbank Corp. for $20 billion. That deal is expected to close this summer, and provide long-ailing Sprint with a much-needed infusion of capital.
With Softbank’s backing, Sprint has struck a deal to buy out the other shareholders of Clearwire Corp., which operates a wireless data network. That should give Sprint more space on the airwaves and allow it to offer high broadband speeds.
Sprint shares rose 1.1 percent to $5.77 Wednesday. The stock, which more than doubled last year, has traded between $5.40 and $6 since October, when Softbank agreed to buy a 70 percent stake. That deal, which Sprint expects to complete by mid-year, gives it financial backing to expand in the U.S.
‘Muted’ Response?
Investors are more focused on the outcome of that agreement than today’s earnings, said Kevin Roe, president of Roe Equity Research LLC.
“The reaction is going to be muted since the Softbank deal dampens any big swing in the stock,” Roe said before the earnings report. Softbank will put Sprint on “a completely different operational trajectory,” he said.
Until then, Sprint continues to lose ground. The number of monthly contract subscribers fell by 243,000. Analysts expected a subscriber loss of almost 206,000, according to an average of eight estimates compiled by Bloomberg. During the same period, AT&T gained 780,000 contract customers, and Verizon Wireless added a record 2.1 million.
To compete for lucrative smartphone customers, Sprint has to match its rivals’ discounts by subsidizing most of the cost of the phones. In exchange for selling the device at a loss, the carriers lure customers into two-year contracts.
With Softbank’s urging, Sprint has made Clearwire Corp. a bigger part of its U.S. plan. In December, Sprint agreed to buy all of Clearwire for $2.97 a share. Clearwire, a high-speed network operator, also has attracted a $3.30-a-share counteroffer by Dish Network Corp.
Sprint also is trying to catch up with its larger competitors in infrastructure upgrades through a plan called Network Vision. The company is providing long-term evolution, or LTE, a high-speed data network to serve the growing number of smartphone and tablet users.
