Sprint (NYSE:S) is expected to report its Q1 earnings on Apr 28th. Here we highlight few key trends in order to guide investors through the earnings release. Sprint primarily competes with AT&T (NYSE:T) and Verizon (NYSE:VZ) in the mobile and fixed line businesses. Our price estimate for Sprint stands at $5.15, which is at a premium of roughly 7% to the market price.
Postpaid Net Subscriber Additions
One of the key issues that Sprint has faced over the last few years is continued losses in its postpaid subscriber base. This loss has been more severe in its iDEN base which uses phones based on push-to-talk technology. On the other hand, the CDMA subscriber base has started to show some improvements recently.
If we look at the subscriber additions in last four quarters, postpaid CDMA subscriber net adds have improved from a loss of 131,000 subscribers in Q1 2010 to gain of 453,000 subscribers in Q4 2010. [1] This shows an average improvement of close to 195,000 subscribers per quarter. On the other hand the losses in iDEN subscriber base have continued and have actually increased slightly in last two quarters, amounting to loss of 395,000 subscribers in Q4 2010. [1]
As a result, we could see CDMA subscriber additions of close to 500,000 in this report. In addition, Sprint may need to hurry the proposed transition of iDEN subscribers to CDMA platform since the iDEN losses don’t seem to be slowing. We can also infer that overall postpaid net adds for Sprint became positive in Q4 2010, and that should be a positive sign for investors.
Sprint’s Commitment to WiMax
Sprint has stuck to WiMax technology for its 4G network rather than pursue LTE technology that both AT&T and Verizon are building out. Sprint has been considering possibility of rolling out LTE as well, but it recently agreed to pay $1 billion in fees to Clearwire for WiMax services, demonstrating its commitment to WiMax at least for the near-term. [2] We noted in a recent note that the decision to pay a one time fee vs. take equity in Clearwire might leave the door open for Sprint to pursue LTE at a later today.
See our note titled Sprint Could be Tipping its Hand with ClearWire Deal.
Other Factors
A couple of other factors that might be worth to look at could be whether Sprint is taking any strategic initiative in response to AT&T’s decision to buy T-Mobile. In addition to this we may see slightly higher seasonal payroll expenses.
See our complete $5.15 Trefis price estimate for Sprint.
