Can Sprint Maintain Its Subscriber Momentum?

by Trefis Team
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Sprint (NYSE:S), the smallest of the four U.S. wireless carriers, published its Q1 2018 results on Wednesday, beating market expectations on earnings and revenues as it continued to add lucrative postpaid customers while expanding its postpaid ARPU on a sequential basis. Below, we take a look at some of the key trends from the company’s earnings release.

We have created an interactive dashboard that outlines our expectations for Sprint over 2018 as well as fiscal 2019. You can modify the key drivers to arrive at your own revenue and EPS estimates for Sprint.

Sprint’s Postpaid Growth Continued

Sprint added a total of 87k postpaid phone subscribers over the quarter, marking its 12th straight quarter of net additions. Postpaid ARPU grew sequentially for the first time in almost five years, standing at $44.57. Although Sprint’s postpaid phone churn remains higher than its peers, standing at 1.55%, the metric declined by 13 basis points on a sequential basis due to seasonality. The company also reported its first sequential growth in wireless service revenue (adjusted for a new revenue reporting standard) in over four years, driven by higher ARPU and the expanding customer base. Sprint’s wireless service revenues had been under pressure over the past few years, amid subscriber defections, higher price competition and the shift to unsubsidized plans. Sprint has been revamping its postpaid plans, offering a new Unlimited Plus and Unlimited Basic plan, which are priced higher than legacy plans. While this could aid further ARPU expansion, Sprint has cautioned that the higher pricing could impact subscriber growth. That said, Sprint’s plans are likely to remain the cheapest in the industry.

Network Upgrades

Sprint is also making progress with its network upgrades, deploying its three spectrum bands (800 MHz, 1.9 GHz, and 2.5 GHz) to more of its macro towers. The company says that it has now deployed its 2.5 GHz band at two-thirds of its macro sites, up from just half its sites a few quarters ago. This should allow the company to significantly improve its capacity and download speeds. These upgrades could also be integral to the carrier’s 5G strategy, as Sprint will leverage the 2.5 GHz band spectrum band to offer next-generation services. Sprint reiterated that it plans to launch the first mobile 5G network in the U.S., with commercial services expected to begin during the first half of 2019.

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