Why Did Sprint Swing To A Net Loss In Q3?

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Sprint (NYSE:S) published its fiscal Q3 (fiscal year ends March 31) results on Thursday, reporting a slightly wider than expected net loss, as it continued to shed postpaid phone subscribers. Below, we provide some of the key takeaways from the company’s earnings and take a look at why it swung to a net loss during the quarter.

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

How Did The Postpaid Phone Business Fare?

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Sprint lost a net of 26k postpaid phone subscribers over the quarter. While this was down from a loss of 34k subscribers in Q2, it compares to a gain of 184k subscribers in the year-ago period. The lackluster performance on the postpaid front is attributable to the company’s focus on pulling back on costly promotions to stabilize the business and also due to more intense competition. For instance, rivals Verizon and T-Mobile respectively added 650k and 1 million postpaid phone customers over the holiday quarter.  Sprint’s postpaid phone churn levels have also trended higher to levels of about 1.71% from 1.60% in the year-ago period, driven by this mounting competition. In mid-2018, the company tweaked its unlimited plans to offer more services, albeit at higher prices, to bolster its ARPU. However, this doesn’t appear to be having an impact on the company’s metrics yet, as postpaid phone ARPU declined to $50 from $51.25 a year ago, although this was partly due to a new revenue reporting standard.

Why Did Sprint Swing To A Net Loss?

Overall, Sprint swung to a net loss on a GAAP basis, after reporting a profit over the previous quarter, as its Services revenues trended lower, while SG&A and interest expenses trended higher. The table below breaks down some of the factors that were responsible for the company’s loss over Q3.

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