Sprint Loses Customers, Money in Latest Quarter

It often seems as if Sprint reports financial results that reflect a transition of some sort. The most-recent quarter is no different.

Sprint reported net operating revenue of $8.5 billion in its second quarter of 2014, representing an operating Loss of $192 million, with adjusted EBITDA of nearly $1.4 billion (EBITDA is operating income/(loss) before depreciation and amortization. Adjusted EBITDA is EBITDA excluding severance, exit costs, and other special items)

Sprint’s operating loss was $192 million, compared to an operating loss of $398 million in the year-ago quarter, primarily driven by lower depreciation and amortization as the year-ago period included accelerated depreciation related to CDMA assets, Sprint said.

Consolidated Adjusted EBITDA of nearly $1.4 billion grew three percent over the prior year period.

Total Sprint net subscriber additions of 590,000 were lead by wholesale net additions of 827,000 balanced by postpaid net losses of 272,000 and prepaid net additions of 35,000.

Sprint expects increased selling costs associated with significantly higher gross additions and upgrade volumes in the fiscal third quarter of 2014; part of Sprint’s new effort to become the price leader in the U.S. mobile market.

Sprint also warned that “the significant loss of postpaid phone customers over the last few quarters has pressured wireless service revenue, and this trend is expected to continue into the next quarter.”

As has so often seemed to be the case, Sprint is once more in a transition, with a new strategy and new leadership. So it is too early to take measure of the prospects for future success.

Sprint announced another 2,000 cuts in staffing levels, as well as "targeting $1.5 billion of annualized cost reductions compared to 2014 spending levels."

Sprint also cut its full-year capex guidance by about $1 billion to less than $6 billion, after a similar reduction a quarter ago.

All those moves make sense if Sprint is committed to becoming a price leader. That implies a lower cost structure than it has at present.