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Sprint Nextel Corporation (S)’s Key Question: Is The National Carrier Really ‘Off to a Good Start’?

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Sprint Nextel Corporation (NYSE:S), the third largest US national carrier, reported its first quarter 2013 earnings on April 24, crushing analyst estimates by posting a narrower than expected loss. The telecom player gave a pleasant surprise by recording a loss of $643 million, which comes to $0.21 per share against analysts’ forecast of a $0.33 loss per share. Despite the fact that the company lost 560,000 contract subscribers due to the Sprint Nextel Corporation (NYSE:S) shutdown process, it kept its operating costs in control to meet revenue expectations while lowering losses. The rising popularity of smartphones worked in favor of the company as it saw gains in revenue per subscriber.

Let’s take a look at some essential figures to assess what’s there for investors.

Sprint Nextel Corporation (NYSE:S)

Digging deep into the numbers

The Kansas carrier, targeted by potential suitors Softbank Corp (TYO:9984) and DISH Network Corp (NASDAQ:DISH), booked revenue of $8.79 billion, which was slightly up compared to the prior year’s top-line of $8.73 billion. However, this was fairly ahead of analyst expectations of $8.71 billion as they predicted the top-line to plunge 0.25% over last year’s figure. Revenue gains for the carrier were flat as growth in Sprint’s business was offset by its Sprint Nextel Corporation (NYSE:S) shutdown process, expected to complete by the end of the second quarter.

Though the overall revenue growth was marginal, it is still impressive as Nextel customers continued to dump the platform. Sprint Nextel Corporation (NYSE:S) lost as many as 771,000 Nextel customers. However, it was successful in converting 46% of these postpaid Nextel subscribers and bringing them onto Sprint’s platform. Also, the company’s service revenue rose 9% to $7.1 billion, reflecting the improved performance of Sprint’s core operation. Postpaid customer turnover also experienced slight improvement from 2% to 1.84%, which suggests increased subscriber loyalty. Prepaid churn was also at its best at 3.26%. Moreover, the carrier’s narrowing loss of $643 million, down from $1.3 billion in the last quarter in light of Hurricane Sandy, is good news for investors.

What about its smartphone sales and its relation with Apple Inc. (NASDAQ:AAPL)?

Smartphone sales formed 86% of total handsets sold during the quarter. The company sold around 5 million smartphones, out of which 1.5 million were Apple Inc. (NASDAQ:AAPL)’s iPhone. This is a bit disappointing, particularly after last quarter when the company sold a record high 2.2 million units. Undoubtedly Sprint Nextel Corporation (NYSE:S) is way behind its bigger rivals AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ), which sold 4.8 million and 4 million iPhones respectively. But what needs to be noted is that 43% of Sprint’s iPhone buyers were new subscribers. This also boosted the revenue per subscriber, which increased by over $1 from the previous quarter to $63.67.

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