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Phones

Sprint wireless customer growth stumbles despite tax windfall

The key metric of wireless subscriber growth declines from a year earlier despite strong profits from tax reform.

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Sprint has a tough road ahead of it. 

Lynn La/CNET

There is no white knight for Sprint

The nation's fourth-largest wireless carrier by subscribers spent much of 2017 in preparation for a merger with No. 3 T-Mobile, only for the companies to walk away from the deal in November. 

It was a shocking development because most in the industry believed the deal made sense, creating a larger combined player to better face off against heavyweights Verizon and AT&T. Sprint, in particular, appeared to need the support of a sizable company -- especially as the industry makes the investment to jump into 5G. It seemed like the transaction was a foregone conclusion, with both companies canceling their earnings conference calls in October because of the merger speculation. 

But a deal with T-Mobile was not to be, leaving Sprint on its own in a particularly competitive field where carriers are bending over backward to win your business with freebies like Netflix and HBO service. The good news for consumers is that carriers will likely stay aggressive when it comes to promotions and incentives to switch. 

Sprint's fiscal third-quarter results, released Friday, underscore the difficulties of running as a standalone business. Sprint added a total 385,000 net new wireless customers, down 31 percent from a year ago. In the key metric of growth in postpaid phone customers, or people who pay their bills at the end of the month, it added 184,000 net new customers, or half of last year's total. 

In comparison, T-Mobile added 891,000 postpaid phone customers, Verizon added 431,000 and AT&T added 329,000 during the critical holiday period. 

Fortunately, analysts had braced for a tough quarter for Sprint. "The healthy volumes buck tempered expectations," said Jefferies analyst Scott Goldman. 

One bright spot is in Sprint's prepaid business, which gained 63,000 net new customers, a reverse of its loss of 460,000 customers a year ago. The company rebooted its Virgin Mobile offering by committing to only iPhones and offering its first year of service for $1

The customer turnover rate, known as churn, for postpaid phones rose from a year ago, although prepaid customers stuck around longer. 

Sprint, however, did post a strong profit of $7.16 billion, or $1.79 a share, thanks in large part to corporate tax reform. Virtually all of its profit -- $7.1 billion -- came from the tax benefit. 

Its revenue, however, fell slightly to $8.24 billion. 

Analysts, on average, had forecast revenue of $8.69 billion, according to Yahoo Finance

Sprint shares rose 4.3 percent to $5.32 in premarket trading.

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