Sprint Nextel suffers more iDEN losses
Sprint Nextel lost more than 700,000 traditional iDEN customers while registering a $211 million loss during the first quarter, offsetting growth in other sectors of the wireless carrier’s business, corporate officials said last month during the company’s earnings conference call.
During the first quarter, the carrier lost 1.1 million prepaid iDEN customers, but about one-third of those users migrated to the company’s CDMA or PowerSource — which uses a dual-mode phone that leverages both the iDEN and CDMA networks — packages, Sprint Nextel Chief Financial Officer Paul Saleh said during the call.
Sprint Nextel CEO Gary Forsee attributed the iDEN customer losses to “lingering network-perception issues” but said the carrier’s recent investments in the iDEN system has the system running at “an all-time best” level.
In January, Sprint Nextel projected a difficult 2007, and many of the Q1 numbers remained in line with that guidance. By the end of the year, Sprint Nextel expects to have 2 million to 3 million PowerSource users, Forsee said.
The carrier reiterated its belief that it will spend $800 million this year to pay for reconfiguration of the 800 MHz band to reduce interference to public-safety licensees. Exactly how much Sprint Nextel spent on rebanding during the first quarter was not available for this story, but Forsee said the amount was relatively small as the carrier continues to work with public-safety licensees to plan for the retunes, which are expected to begin in earnest later this year.
“We expect spending [on 800 MHz rebanding] to increase during the second half of this year,” Forsee said.
With the decline of iDEN customers overshadowing gains on its CDMA network, Sprint Nextel reported an overall loss of 220 million post-paid subscribers. The iDEN network saw an increase of 275,000 prepaid Boost Mobile subscribers during the quarter.
Trying to balance the success of the Boost brand while protecting high-margin former Nextel customers on the iDEN network is a tricky financial proposition for the carrier, said Roger Entner, senior vice president of communications for IAG Research.
“If they would want to, they could add a lot more Boost customers,” he said. “But that would make life a lot harder for the Nextel customers, so they have deliberately not shipped as many Boost phones as they could have sold. They don’t want to get a $35 [Boost] customer and thereby lose a $70 [Nextel] customer. In the end, it’s not about how many subscribers you have, it’s how much money you make.”
But Entner said he does not believe Sprint Nextel will shut off new Boost subscriptions to save capacity on the iDEN network for high-margin enterprise customers.
“You can’t turn off a successful marketing campaign just like that,” Entner said.
What Sprint Nextel really needed was for the new Motorola vocoder to effectively double the capacity on the iDEN network, as the solution was touted to do, Entner said.
“But it doesn’t,” he said.
Indeed, Sprint Nextel officials have acknowledged that the vocoder only enhanced capacity on the iDEN network by about 20%, making it much more difficult for the carrier to add new subscribers to the network and reducing the company’s flexibility when trying to execute spectrum swaps for rebanding.
In terms of future services, Forsee said tests for the QChat push-to-talk service that will be offered over the CDMA network are “right on track,” meeting the carrier’s standard of DirectConnect push-to-talk latency performance. QChat field demonstrations will begin this summer, he said.
Forsee said Sprint Nextel will detail its WiMAX deployment strategy by the fall and offered some insight into the availability of devices that will be able to access the new broadband network. The carrier expects WiMAX cards for laptops to be available late this year, handsets to be available mid-2008 and devices with embedded WiMAX connectivity to be on the market in 2009, he said.