Sprint’s Growth comes at a Cost

by Matt Klassen on November 4, 2015

When Marcelo Claure took the reins of Sprint in August 2014, he promised that he would take the carrier on a “transformational journey,” committing to taking “bold actions” in an effort to win back customers lost due to the company’s spotty and unreliable network coverage.

Say what you will about Sprint today, but Claure has worked hard to keep his promise, as he has overhauled much of the company, stripping away the overly complex pricing plans, committing resources to network expansion, and even introducing the concept of smartphone leasing, something the rest of the industry now emulates.

But while Claure’s efforts have clearly started to pay dividends, with customers finally returning to the company, it is still not enough, as Sprint was once again outclassed in growth by close rival T-Mobile. Not only that, but Claure’s efforts to rejuvenate the company continue to hit Sprint directly in the pocketbook, as it posted a $585 million loss on only $7.98 billion total revenue.

Under the watch of Claure, Sprint has attempted to match the competitive promotional campaigns of its rival T-Mobile, while attempting to lure customers away from established competitors AT&T and Verizon. To that end, the company delved into half-price offers, increased it data allotments, began a hand-delivery services of new phones, open new retail locations, and rolled out the industry’s most-affordable iPhone 6 leasing plan, at $1/month.

Because of this strong promotional push, Sprint reported that it added 1.1 million total net customers in the quarter ending September 30th, with an increase of 237,000 post-paid users during that period, the first increase in that category in several years. Much of the growth, the company admitted, was due to the effective transition of prepaid customer to post-paid users, somewhat skewing the actual growth numbers. On a positive note though, the overall growth plus the growth of post-paid subscribers is a clear indicator that Sprint is now increasingly being viewed as a reliable wireless brand, as opposed to a prepaid or budget brand as it was before.

But again, such promotions have come at quite a cost for Sprint, as the company posted a quarterly loss of $585 million, or 15 cents per share. That’s a sharp increase from the per-share loss of 8 cents on revenues of $8.14 billion that analysts had predicted, a result that immediately drove Sprint’s share price down 7.6 percent to $4.48.

While Claure acknowledged that his company is only about “one-third there” in regards to his overall plan, he also laid out a cost-cutting plan as well.

“Basically we’re going much deeper and looking at every single line item in the (profit and loss statement),” Claure said on a conference call with analysts. “We’re looking at our labour costs, maybe optimizing labour, we’re looking at our cost of service, we’re spending hundreds of millions of dollars on our competitors in roaming, and as the network gets built out and finished the roaming costs will drop dramatically. We’re looking at how we run our network, we’re looking we source devices, we’re looking to be smart in how we use technology to drive costs down.”

While the company may be on the path back to respectability, that journey is going to take some time. But of course investors are wary, meaning that sustaining this sort of customer growth while trimming costs is going to be tricky going forward, as the company tries to maintain its momentum while shedding excess baggage.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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