Sprint Tops Estimates as More Customers Embrace Smartphones

Sprint Nextel Corp., 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 in an effort to catch up with Verizon Wireless and AT&T Inc. Its sales of Apple Inc.’s iPhone, which Sprint added 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.

Sprint shares fell less than 1 percent today, closing at $5.74 in New York. The stock, which more than doubled last year, has traded between $5.40 and $6 since October, when Tokyo-based Softbank Corp. agreed to pay $20 billion for a 70 percent stake. That deal, which Sprint expects to complete by midyear, gives it financial backing to expand in the U.S. and mount a bigger challenge to Verizon and AT&T.

‘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 company has now had six straight years of losses and its lucrative contract customers are leaving the carrier.

The number of monthly contract subscribers fell by 243,000 last quarter. 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.

Raising Prices

Sprint may soon consider raising service plan prices to recoup those costs more quickly, Chief Executive Officer Dan Hesse said. The company isn’t in a position to increase prices yet, he said.

“We wouldn’t consider raising prices right now because we don’t have a network leadership position,” Hesse said.

With Softbank’s urging, Sprint has made Clearwire Corp. a bigger part of its U.S. network expansion 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.

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