Loss from Sprint's First Quarter Results is Less than Expected

If you have been watching TV commercials from the four major U.S. carriers, you know that there is an ongoing battle, as it were, to acquire and keep subscribers. Earlier this week, Sprint announced its earnings results for the first quarter. While they did report a loss, the overall numbers were better than expected.

According to analysts, the expectation was that Sprint would show a loss of nine cents per share for the first quarter. The $20 million loss that Sprint reported for the quarter ending June 30, only represents a one-cent per share loss.

Unfortunately for the company, the net 675,000 new customers that were added were not enough to keep the carrier in third place. With a total of 57.7 million customers, Sprint falls behind T-Mobile which now boasts a total of 58.9 million customers.

It seems that the bottom line is that Sprint has been spending too much to retain and acquire customers. Marcello Claure, Sprint’s CEO mentioned that the main focus would be on retaining current customers since the cost is much less than acquiring new ones.

One reason is that Sprint has been spending so much money is that monthly leasing plans require wireless carriers to pay vendors upfront for their devices. You may recall that Japan’s SoftBank owns an 80 percent share of Sprint. The solution that SoftBank’s CEO, Masayoshi Son has is that along with other partners, a leasing company will be set up designed to finance payments for the leased devices on what is being referred to as attractive terms.

Sprint’s leasing plans appear to be working in favor of the carrier as it reported record low customer defections in its postpaid business. Defections, which the industry refers to as churn, fell from 2.05 percent in first quarter 2014 to 1.56 percent this year.

Matt Goodman, an analyst at ITG said, "What they posted today in terms of postpaid churn was very encouraging. The question is, can Sprint now start to move in a positive direction, and we see the beginnings of that right now."

Almost sounding like a response to Goodman’s comments, during the earnings call, Claure said, "We are already beginning steps to eliminate as much or more cost next year as we continue to reinvent how we operate.”

Looking ahead, Sprint’s Chief Financial Officer Joseph Euteneuer, who will be stepping down before the end of this month, said that cost cuts in fiscal 2016 would be equal to or greater than those in 2015.