OVERLAND PARK, Kan. (BUSINESS WIRE), July 30, 2014 – Sprint Corporation (NYSE:S) today reported operating results for the first fiscal quarter of 2014, including net income of $23 million, the best performance in almost seven years when excluding the non-cash transaction-related impacts from last year, and consolidated operating income of $519 million, the highest in more than seven years.
“We reached several key milestones for the company this quarter, including largely completing a multi-year project to upgrade our core 3G and voice network, expanding 4G LTE coverage to approximately 254 million people and launching nationwide availability of HD Voice,” said Dan Hesse, Sprint CEO. “Our complete network replacement impacted the network experience, so we lost customers last quarter. To improve customer confidence given our recent network build progress, we launched the Sprint Satisfaction Guarantee, which invites customers to experience our new and improved network and enjoy the value of our Sprint Framily plans.”
Adjusted EBITDA* Shows Solid Year-Over-Year Growth
Adjusted EBITDA* of $1.83 billion grew 30 percent over the prior year period and Adjusted EBITDA* margin of nearly 24 percent was the company’s best in six years. Wireless Adjusted EBITDA* of $1.8 billion increased nearly 40 percent from the prior year period, driven mostly by lower expenses across several areas of the business, partially offset by declining wireless service revenues. Lower postpaid subsidy costs associated with impacts of the Sprint Easy Pay installment billing plan and device sales mix as well as lower customer care and cost of service expenses all contributed to year-over-year growth in Wireless Adjusted EBITDA* of nearly $500 million.
Sprint Platform Subscriber Loss Improves
The Sprint platform reported a net loss of 220,000 customers in the quarter, compared to a net loss of 383,000 customers last quarter and 520,000 customers in the prior year period. Sprint platform postpaid net losses of 181,000 during the quarter were largely due to expected elevated churn levels related to service disruption associated with the company’s ongoing network overhaul. However, Sprint platform postpaid gross additions grew by 16 percent compared to the year-ago quarter, and retail smartphone sales were nearly 5 million, representing a record 87 percent of total retail handset device sales in the quarter. Sprint platform prepaid net loss of 542,000 customers was primarily caused by the timing of the annual Lifeline program recertification process that impacted the Assurance Wireless® subscriber base. Sprint added 503,000 wholesale and affiliate customers during the quarter. The Sprint platform served over 53 million subscribers at the end of the quarter.
Network Deployment Reaches Key Milestones
Sprint’s replacement of its entire 3G and voice network, one of the most complex network upgrades in history, is largely complete and network performance metrics continue to improve. Sprint also hit its mid-year target for 4G LTE coverage, as the company now covers approximately 254 million people in 488 cities across the country including Pittsburgh and Buffalo, N.Y., which launched today.
Sprint HD Voice service is also now available nationwide and represents the new Sprint standard for crystal-clear voice calls. Sprint’s HD Voice provides fuller, more natural-sounding voice, plus noise-cancelling technology that virtually eliminates background noise from places like busy roads or crowded restaurants1. Over 16 million customers currently have HD Voice-enabled devices.
The deployment of Sprint Spark™, an innovative combination of advanced network and device technology that leverages the company’s 800MHz, 1.9GHz and 2.5GHz spectrum, continues to progress and is now available in 27 markets across the country. Twenty-two Sprint Spark-capable devices are currently available, including the recently launched Samsung Galaxy S® 5 Sport, LG G3, and HTC One (M8) Harman/Kardon® edition.
Sprint Satisfaction Guarantee Demonstrates Confidence in America’s Newest Network
In June, the company announced the Sprint Satisfaction Guarantee, providing wireless users a worry-free experience of Sprint’s improved network, exclusive Framily plan and unique services. If customers aren’t completely satisfied with the Sprint experience within the first 30 days, Sprint will refund the cost of their device and waive all service and activation charges.
Sprint Earns Third-Party Recognition for Customer Experience, Innovation and Corporate Responsibility
According to results from the 2014 American Customer Satisfaction Index released in May, Sprint is the most improved U.S. company in customer satisfaction, across all 43 industries, over the last six years. Additionally, Light Reading recognized Sprint with a 2014 Leading Lights Award in the category of Most Innovative 4G Service for Sprint Spark. Sprint was also the winner of the Informa Telecoms & Media MVNO’s Industry Awards Best Wholesale Operator for the second consecutive year.
Sprint also received multiple awards for its corporate responsibility efforts during the quarter. Sprint was recognized by the Department of Energy for achievements in the Better Buildings Challenge for energy reduction, and the Environmental Protection Agency recognized Sprint with the WasteWise National Partner of the Year Award for Very Large Companies for diverting solid waste from landfills. Additionally, Sprint received the VITA Achievement Award for Environmental Sustainability from the Wireless Foundation.
Forecast
The company continues to expect calendar 2014 Adjusted EBITDA* to be between $6.7 billion and $6.9 billion.
Wireless Operating Statistics (Unaudited) Quarter To Date 6/30/14 3/31/14 6/30/13 Net (Losses) Additions (in thousands) Sprint platform: Postpaid (3) (181 ) (231 ) 194 Prepaid (4) (542 ) (364 ) (486 ) Wholesale and affiliate 503 212 (228 ) Total Sprint platform (220 ) (383 ) (520 ) Nextel platform: Postpaid (3) – – (1,060 ) Prepaid (4) – – (255 ) Total Nextel platform – – (1,315 ) Transactions: Postpaid (3) (64 ) (102 ) (179 ) Prepaid (4) (77 ) (51 ) (20 ) Wholesale 27 69 – Total transactions (114 ) (84 ) (199 ) Total retail postpaid net losses (245 ) (333 ) (1,045 ) Total retail prepaid net losses (619 ) (415 ) (761 ) Total wholesale and affiliate net additions (losses) 530 281 (228 ) Total Wireless Net Losses (334 ) (467 ) (2,034 ) End of Period Subscribers (in thousands) Sprint platform: Postpaid (3) 29,737 29,918 30,451 Prepaid (4) 14,715 15,257 15,215 Wholesale and affiliate 8,879 8,376 7,710 Total Sprint platform 53,331 53,551 53,376 Nextel platform: Postpaid (3) – – – Prepaid (4) – – – Total Nextel platform – – – Transactions: (a) Postpaid (3) 522 586 173 Prepaid (4) 473 550 39Wholesale
227 200 – Total transactions 1,222 1,336 212 Total retail postpaid end of period subscribers 30,259 30,504 30,624 Total retail prepaid end of period subscribers 15,188 15,807 15,254 Total wholesale and affiliate end of period subscribers 9,106 8,576 7,710 Total End of Period Subscribers 54,553 54,887 53,588 Supplemental Data – Connected Devices End of Period Subscribers (in thousands)Retail postpaid
988 968 798 Wholesale and affiliate 4,192 3,882 3,057 Total 5,180 4,850 3,855 Churn Sprint platform: Postpaid 2.05 % 2.11 % 1.83 % Prepaid 4.44 % 4.33 % 5.22 % Nextel platform: Postpaid – – 33.90 % Prepaid – – 32.13 % Transactions: (a) Postpaid 4.15 % 5.48 % 26.64 % Prepaid 6.28 % 5.11 % 16.72 % Total retail postpaid churn 2.09 % 2.18 % 2.63 % Total retail prepaid churn 4.50 % 4.35 % 5.51 % Nextel Platform Subscriber Recaptures Subscribers (in thousands) (5): Postpaid – – 364 Prepaid – – 101 Rate (6): Postpaid – – 34 % Prepaid – – 39 % (a) We acquired approximately 352,000 postpaid subscribers and 59,000 prepaid subscribers through the acquisition of assets from U.S. Cellular when the transaction closed on May 17, 2013. We acquired approximately 788,000 postpaid subscribers, 721,000 prepaid subscribers, 93,000 wholesale subscribers and transferred 29,000 Sprint wholesale subscribers that were originally recognized through our Clearwire MVNO arrangement to Transactions postpaid subscribers as a result of the Clearwire acquisition when the transaction closed on July 9, 2013. Wireless Operating Statistics (Unaudited) (continued)Successor
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