Sprint Reports Fiscal Year 2019 First Quarter Results

August 02, 2019

OVERLAND PARK, Kan., Aug. 2, 2019 /PRNewswire/ —

  • Wireless service revenue of $5.3 billion
    • Postpaid wireless service revenue of $4.2 billion grew year-over-year
    • Postpaid average revenue per account (ARPA) of $124.89 stabilized year-over-year
  • Net loss of $111 million, operating income of $455 million, and adjusted EBITDA* of $3 billion
  • Postpaid net additions of 134,000
    • Data device net additions of 262,000 were partially offset by phone net losses of 128,000
    • Average postpaid accounts were stable year-over-year
  • Continued momentum on Next-Gen Network deployment
    • True Mobile 5G network launched in parts of five major metro areas with more to come
    • Network investments of $1.2 billion grew year-over-year for the fourth consecutive quarter
  • Further progress on digitalization initiatives
    • Postpaid gross additions in digital channels increased approximately 50 percent year-over-year

 

Sprint Corporation (NYSE: S) today reported results for the fiscal year 2019 first quarter, including year-over-year growth in postpaid wireless service revenue and postpaid net additions. The company also reported a net loss of $111 million, operating income of $455 million, and adjusted EBITDA* of $3 billion.     

“While we delivered good results in the first quarter relative to expectations, the business still faces several structural headwinds and I remain convinced the merger with T-Mobile is the best outcome for our customers, employees, industry and all stakeholders,” said Sprint CEO Michel Combes. “With the recent clearance of our merger by the Department of Justice, and the anticipated approval from the FCC, we are moving one step closer to building one of the world’s most advanced 5G networks and providing American consumers a better network and overall experience at New T-Mobile.”    

 

 

Stable Wireless Service Revenue

Sprint has focused on growing revenue per customer account by selling additional devices and value-added services, including promoting its feature-rich Unlimited Plus and Unlimited Premium rate plans. This strategy delivered year-over-year growth in postpaid wireless service revenue and postpaid net additions of 134,000, driven by growth in data devices and partially offset by postpaid phone customer losses. The company also reported a stabilization of postpaid ARPA and average postpaid accounts.

Total wireless service revenue of $5.3 billion declined 3 percent year-over-year, largely because of the continued amortization of prepaid contract balances as a result of adopting the new revenue standard last year. Excluding this non-operational impact, total wireless service revenue would have been relatively flat year-over-year.

The company also reported the following financial results.

(Millions, except per share data)

Fiscal 1Q19

Fiscal 1Q18

Change

Net (loss) income attributable to Sprint

($111)

$176

($287)

Basic (loss) income per share

($0.03)

$0.04

($0.07)

Operating income

$455

$815

($360)

Adjusted EBITDA*

$3,042

$3,280

($238)

Net cash provided by operating activities

$2,244

$2,430

($186)

Adjusted free cash flow*

($58)

$8

($66)

 

Network Investments Continued as Sprint Launches True Mobile 5G Network

Sprint’s quarterly network investments, or cash capital expenditures excluding leased devices, of $1.2 billion grew year-over-year for the fourth consecutive quarter as the company made continued progress on executing its Next-Gen Network plan. Sprint nearly doubled the number of Massive MIMO radios on-air during the quarter and currently has about 3,000 units deployed.

Massive MIMO is a breakthrough technology that improves network capacity and is at the foundation of Sprint’s True Mobile 5G network. The company is using 64T64R (64 transmitters 64 receivers) Massive MIMO radios that support a feature called split-mode, which enables Sprint to simultaneously deliver LTE and 5G New Radio (NR) service.

True Mobile 5G from Sprint is available in areas of Atlanta, Chicago, Dallas-Fort Worth, Houston and Kansas City, and the company expects to launch service in areas of Los Angeles, New York City, Phoenix and Washington, D.C., in the coming weeks. Once all nine metro areas are launched, Sprint’s mobile 5G network will cover approximately 2,100 square miles and 11 million people, giving Sprint the largest initial 5G coverage footprint in the U.S. The company is offering 5G capable smartphones from LG and Samsung, along with a hotspot device from HTC.

As Sprint launches True Mobile 5G, the company continues to believe that a merger with T-Mobile is critical to accelerate the deployment of a ubiquitous, nationwide 5G network – one that includes coverage in rural locations. The combined company is expected to have the resources and technology to build a 5G network that fuels innovation across every industry, dramatically increasing competition, unleashing new economic growth, and creating thousands of jobs and billions of dollars in U.S. economic value. Together, the combined company is expected to lead the world in next-generation technology services and applications, bringing 5G service to nearly all Americans.

Building a Digital Disruptor

Sprint continued to leverage digital capabilities to transform the way it engages with customers. 

  • Postpaid gross additions in digital channels increased approximately 50 percent year-over-year.
  • Approximately 30 percent of all Sprint customer care chats are now performed by virtual agents using artificial intelligence.
  • The company launched voice-to-digital tools that allow customers calling with specific issues to use a digital self-service option.
  • Web conversions improved and orders from digital media more than doubled year-over-year.

Additional Information

  • Additional information about results, including a message from management, is available on our Investor Relations website at www.sprint.com/investors.

 

Wireless Operating Statistics (Unaudited)

         

 Quarter To Date 

   

6/30/19

3/31/19

6/30/18

Net additions (losses) (in thousands)

     

Postpaid(a)

134

169

123

Postpaid phone

(128)

(189)

87

Prepaid(a)

(169)

(30)

3

Wholesale and affiliate

(140)

(147)

(69)

Total wireless net (losses) additions

(175)

(8)

57

       

End of period connections (in thousands)

     

Postpaid(a) (b)(c)(d)

33,075

32,774

32,187

Postpaid phone(b) (c)

26,470

26,598

26,847

Prepaid(a) (b) (c)

8,647

8,816

9,033

Wholesale and affiliate (c) (d) (e)

12,590

12,897

13,347

Total end of period connections

54,312

54,487

54,567

       

Churn

     

Postpaid

1.74%

1.81%

1.63%

Postpaid phone

1.78%

1.82%

1.55%

Prepaid

4.23%

4.37%

4.17%

       

Supplemental data – connected devices

     

End of period connections (in thousands)

     

Retail postpaid

3,453

3,121

2,429

Wholesale and affiliate

9,968

10,384

10,963

Total

13,421

13,505

13,392

       

ARPU(f)

     

Postpaid

$           42.57

$           43.25

$           43.55

Postpaid phone

$           49.87

$           50.18

$           49.57

Prepaid

$           32.15

$           33.67

$           36.27

       

ARPA(g)

     

Average postpaid accounts (in thousands)

11,208

11,184

11,176

Postpaid ARPA

$         124.89

$         126.12

$         124.93

       

 

(a)During the three-month period ended June 30, 2019, net subscriber additions and end of period subscribers under the non-Sprint branded postpaid plan offering were 116,000 and 670,000, respectively, and are included in total retail postpaid subscribers above.

(b)During the three-month period ended June 30, 2018, we ceased selling devices in our installment billing program under one of our brands and as a result, 45,000 subscribers were migrated back to prepaid from postpaid.

(c)  As a result of our affiliate agreement with Shentel, certain subscribers have been transferred from postpaid and prepaid to affiliates. During the three-month period ended June 30, 2018, 10,000 and 4,000 subscribers were transferred from postpaid and prepaid, respectively, to affiliates.

(d)  During the three-month period ended June 30, 2019,  one of our postpaid customers purchased a wholesale MVNO and as a result, 167,000 subscribers were transferred from the wholesale to postpaid subscriber base.

(e)  On April 1, 2018, approximately 115,000 wholesale subscribers were removed from the subscriber base with no impact to revenue.

(f)  ARPU is calculated by dividing service revenue by the sum of the monthly average number of connections in the applicable service category. Changes in average monthly service revenue reflect connections for either the postpaid or prepaid service category who change rate plans, the level of voice and data usage, the amount of service credits which are offered to connections, plus the net effect of average monthly revenue generated by new connections and deactivating connections.  Postpaid phone ARPU represents revenues related to our postpaid phone connections.

(g)  ARPA is calculated by dividing postpaid service revenue by the sum of the monthly average number of retail postpaid accounts.

 

 

 

Wireless Device Financing Summary (Unaudited)

     

(Millions, except sales, connections, and leased devices in property, plant and equipment)

         

 Quarter To Date 

   

6/30/19

3/31/19

6/30/18

       

Postpaid activations (in thousands)

3,475

3,730

3,473

Postpaid activations financed

79%

79%

83%

Postpaid activations – operating leases

59%

58%

70%

       

Installment plans

     

Installment sales financed

$             417

$             368

$             213

Installment billings

$             209

$             219

$             325

Installment receivables, net

$           1,024

$             926

$             983

       

Equipment rentals and depreciation – equipment rentals

     

Equipment rentals   

$           1,359

$           1,359

$           1,212

Depreciation – equipment rentals

$           1,029

$           1,084

$           1,136

       

Leased device additions

     

Cash paid for capital expenditures – leased devices

$           1,516

$           1,702

$           1,817

       

Leased devices  

     

Leased devices in property, plant and equipment, net

$           6,424

$           6,612

$           6,213

       

Leased device units

     

Leased devices in property, plant and equipment (units in thousands)

15,762

15,889

15,169

       

Leased device and receivables financings net proceeds

     

Proceeds

$           1,120

$           1,783

$           1,356

Repayments

(890)

(2,500)

(1,070)

Net proceeds (repayments) of financings related to devices and receivables

$             230

$            (717)

$             286

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

     

(Millions, except per share data)

       

Quarter To Date

 

6/30/19

3/31/19

6/30/18

Net operating revenues

     

Service revenue

$           5,563

$           5,656

$           5,740

Equipment sales

1,220

1,426

1,173

Equipment rentals

1,359

1,359

1,212

Total net operating revenues

8,142

8,441

8,125

Net operating expenses

     

Cost of services (exclusive of depreciation and amortization below)

1,710

1,645

1,677

Cost of equipment sales

1,341

1,561

1,270

Cost of equipment rentals (exclusive of depreciation below)

225

186

124

Selling, general and administrative

1,907

2,043

1,867

Depreciation – network and other

1,120

1,113

1,023

Depreciation – equipment rentals

1,029

1,084

1,136

Amortization

118

133

171

Goodwill impairment (1)

2,000

Other, net

237

350

42

Total net operating expenses

7,687

10,115

7,310

Operating income (loss)

455

(1,674)

815

Interest expense

(619)

(629)

(637)

Other income, net

28

34

42

(Loss) income before income taxes

(136)

(2,269)

220

Income tax benefit (expense)

22

91

(47)

Net (loss) income