iPhone exceeds Sprint's expectations

IDG News Service - The Apple iPhone is attracting more new subscribers than expected to Sprint Nextel, and it will probably ease rather than worsen congestion on the carrier's 3G network, Sprint executives said as they announced third-quarter results on Wednesday.

On a conference call to discuss the results, CEO Dan Hesse also said Sprint aims to take advantage of Clearwire's planned 4G LTE network to offload mobile data consumption from its own network.

Sprint tried to make up for uncertainty and concerns that came in the wake of a financial analyst conference on Oct. 7, when it gave virtually no view of what it expected from the iPhone and little information about its future relationship with Clearwire.

Sprint began selling iPhones on Oct. 14 under a four-year deal with Apple. In the first few weeks of availability, the devices have attracted new customers at a faster rate than any previous Sprint smartphone and faster than the carrier's own business plan estimates, Hesse said.

"Our early results selling the iPhone and iPhone 4 confirm the iPhone's ability to attract new customers," Hesse said. But Sprint isn't changing its business plan yet on the strength of those results. "You don't declare victory after two weeks," he said.

Over the past few years, the lack of an iPhone option has been the biggest reason why Sprint subscribers have left and why potential customers haven't tried Sprint, Hesse said.

Sprint isn't worried about its 3G EV-DO (Evolution-Data Optimized) network slowing down under growing capacity demand from the iPhone, which isn't equipped to use 4G. In fact, because of the phone's efficient use of the network, the load will probably be reduced, Hesse said.

"IPhone users are expected to use significantly less 3G than a typical user of a dual-mode 3G/4G device," Hesse said.

It will cost Sprint more to add a subscriber with the iPhone, due to a device subsidy of about $200 each, the carrier said. But over the term of its deal with Apple, Sprint expects the products to boost its revenue by between $7 billion and $8 billion, because the iPhone attracts new subscribers and because iPhone users typically pay more per month for service.

The cost of rolling out the iPhone, plus the carrier's Network Vision infrastructure project, will cause a cash shortage at Sprint over the next few years, but by 2015, the benefits of the two initiatives will outweigh the costs, said Chief Financial Officer Joe Euteneuer.

For the third quarter ended Sept. 30, Sprint posted a net loss of $301 million, or $0.10 per share, on revenue of $8.33 billion. Compared with last year's third quarter, revenue was up from $8.15 billion and the company's net loss narrowed from $0.30 per share.

In trading on the New York Stock Exchange late afternoon on Wednesday, Sprint's shares were down $0.14 at $2.57.

Stephen Lawson covers mobile, storage and networking technologies for The IDG News Service. Follow Stephen on Twitter at @sdlawsonmedia. Stephen's e-mail address is stephen_lawson@idg.com