Sprint Preview: All About Subscriber Growth

July 27th, 2011 by Trefis Team
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Sprint (NYSE:S) plans to announce Q2 earnings tomorrow. We will closely watch subscribers growth trends as this is the main parameter for Sprint for this quarter. Sprint continues to lose overall subscribers (except for Q4 2010 when it gained 58,000 subscribers) as its CDMA subscriber base continues to rise. During the Q1 earnings call, Sprint mentioned that it expects net subscriber additions in 2011. [1] Hence Q2 results could start the positive subscriber trend for Sprint and give meaningful competition to heavyweights AT&T (NYSE:T) and Verizon (NYSE:VZ).

Our $5.80 price estimate for Sprint stock is just over 10% above the market price.

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CDMA subscriber growth should continue

Sprint operates on two different platforms: CDMA and iDEN. While most subscribers use CDMA, many still use iDEN which was made famous due to its push-to-talk capabilities. The company has been rapidly losing iDEN subscribers and now plans them to migrate to the CDMA platform.

Although Sprint has struggled over the past few years, its subscriber trends have started to improve as a result of better customer service, network upgrade initiatives and the company’s low-cost advantage. Due to these factors, we believe Sprint’s CDMA platform will continue to gain market share in the U.S. wireless market going forward.

New initiatives to attract subscribers

Sprint has taken a number of initiatives in the past quarter. It started offering service credits to customers who switch to Sprint from other wireless carriers. Specifically, Sprint was looking to take advantage of the transitional instability created out of the announcement of AT&T and T-Mobile merger (see Sprint Looks to Shake Up the Big Guys).

Additionally, Sprint signed a deal with LightSquared Inc. under which both the companies will share their network expansion costs and equipment for jointly developing and operating 4G LTE network, the next generation of mobile networks with faster speeds and reliability (see Sprint LTE Announcement Could Move the Stock). If Sprint wishes to gain market share in the U.S. telecom market, it must continue to improve its network and so this alliance with LightSquared looks like a good move so far.

See our complete analysis for Sprint stock here

Notes:
  1. Sprint Q1 2011 earnings conference call transcript, April 28th, 2011 [↩]