Sprint sees first net subscriber growth in three years but worries linger

Nation's No. 3 wireless carrier has a 'long way to go, especially with the Clearwire WiMax gamble,' one analyst said

Sprint Nextel announced its first overall net subscriber growth in three years today, a welcome sign to many analysts, who still worry about the carrier over the long-term.

The increase in net subscribers by 111,000 for the second quarter, for a total of 42.8 million, is "good news, but at what cost?" asked Phillip Redman, an analyst at Gartner Inc.

At that size, Sprint remains the nation's third largest carrier, behind Verizon with 92.1 million subscribers and AT&T with 90.1 million, based on their second quarter financials.

Redman noted that Sprint's revenues are still down (by 1% over the same quarter of 2009), and added the company was still losing high-profit business customers while going after lower-profit consumers.

"Just because you lose fewer customers than before and see some improvements on gaining new ones doesn't mean you are out of the hole yet," Redman added.

Sprint has a "long way to go, especially with the Clearwire WiMax gamble," Redman said. He said WiMax, which Sprint advertises as 4G and which the HTC Evo 4G smartphone can take advantage of was "too expensive" a technology for Sprint.

The revenue loss Redman referred to was a 1% drop from the second quarter of 2009 as well as the first quarter of 2010, Sprint said. For the second quarter of 2010, revenues totaled $8.025 billion.

Some analysts, and Sprint, attributed part of the net subscriber increase to demand for smartphones like the Evo, as well as the BlackBerry Curve.

Sprint said it had churn, or turnover, on postpaid subscribers of 1.85%--its best ever rate. Still, Sprint lost 228,000 postpaid subscribers in the quarter. (The net increase of 111,000 represents all areas of business in addition to postpaid, such as pre-paid, wholesale and affiliate subscribers.)

Jack Gold, an analyst at J. Gold Associates, said that the Evo has had a positive effect on Sprint, adding that supply shortages of the device can't help.

"They are very price competitive, offering an all-you-can-eat plan for $69 a month that is helping them," Gold said.

Gold joined Redman with concerns about WiMax, which is still not widely available enough to help most customers. "Sprint will still live or die on 3G service and how well the standard devices that are not WiMax work," he said.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at  @matthamblen or subscribe to Matt's RSS feed. His e-mail address is mhamblen@computerworld.com.

Copyright © 2010 IDG Communications, Inc.

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