Sprint CEO: Verizon benefited most from Nextel turnover

Even as it works to win back Nextel customers, Sprint says it plans to expand its 4G LTE network into four new markets by August.

Sprint CEO Dan Hesse. CNET

Verizon Wireless got fat off the customers that left Sprint Nextel's iDEN network over the past few years.

That's according to Sprint CEO Dan Hesse, who told investors today that Verizon has nabbed half of the customers who left the ailing Nextel service over the past few years. AT&T grabbed roughly a fifth of the departing customers, while Sprint got a quarter.

"The iDEN (Nextel) network was a big source of customers for our rivals, particularly Verizon," Hesse said.

More recently, Sprint has shifted its strategy and rededicated its resources into winning back Nextel customers, who are still leaving ahead of the planned network shutdown next year. In the second quarter, Sprint said it managed to grab 60 percent of departing customers, higher than the 46 percent rate it had in the first quarter and its goal of a 30 percent rate.

Converting those departing Nextel customers is more important than ever with fewer consumers up for grab in the market. All of the major carriers posted record-low turnover rate on their core contract service, and with few people without a cell phone, the market for new customers is limited. It's a dilemma every carrier faces, but one that has hit Sprint particularly hard because it continues to bleed Nextel subscribers.

Sprint signed up 442,000 net new contract customers in the second quarter , but lost a net 688,000 Nextel customers. In total, it added 283,000 customers, helped by its wholesale and reseller businesses.

With 4.4 million customers on the Nextel network remaining, there will continue to be a lot of turnover on that side of the business. Chief Financial Officer Joe Euteneuer doesn't believe Sprint can keep up its current pace, but should exceed the 30 percent mark through the next few quarters.

Prior to late 2011, Sprint's best financial strategy for Nextel was to preserve the customer base by improving the service and network quality, Hesse said. He added that Verizon benefited the most because it offered a similar push-to-talk service.

But once the company made the decision to shut things down, it changed gears, putting its limited marketing resources into the Nextel base. Hesse said it costs $200 less to acquire a Nextel subscriber than to go out and get a new customer altogether.

Sprint can't turn off that network soon enough. The company accelerated the shutdown of 9,600 Nextel sites, reducing the number of towers in the network by a third. The last of the towers should be trned off by June 30 next year.

At the same time, the company is turning on new sites with its Network Vision plan, which includes a more flexible network able to handle multiple wireless technologies, including its faster 4G LTE network. Earlier this month, it launched its LTE service in 15 cities. Steve Elfman, president of Sprint's network operations, said he expects to launch in four additional cities -- Baltimore; Gainesville, Ga.; Manhattan/Junction City, Kan., and Sherman-Denision, Texas -- by the end of August.

The deployment has slowed because the company is still rolling out fiber backhaul connections, or the ground connection needed to connect a cellular tower to the central network, as well as by birds that are still nesting on inactive sites. Elfman said there are several hundred sites just waiting to be turned on.

"Once we get these birds to leave, we can turn on these sites," Elfman said.

Sprint has 2,000 Network Vision sites turned on, and Elfman said the company is on pace to hit its goal of turning on 12,000 sites by the end of the year.

Still, Sprint lags behind its larger rivals when it comes to LTE coverage. Verizon Wireless has a massive lead with 337 markets, while AT&T has 47. While Sprint has been selling a number of LTE phones, including Samsung Electronics' Galaxy S III and HTC's Evo 4G LTE, they aren't able to access the fastest speeds unless they are in one of the few Sprint LTE markets.

 

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