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Sprint's subscriber losses show why it needs T-Mobile lifeline

The company lost a staggering 175,000 customers during the last fiscal quarter.

A Sprint store logo seen in Los Angeles, California

Sprint posted a 175,000 loss in total subscriber count for first quarter in FY 2019. 

Ronen Tivony/SOPA Images/LightRocket via Getty Images

Sprint received the the green light from the Justice Department for its $26.5 billion merger with T-Mobile last week, and after today, it's clear why it needs the deal to happen. 

On Friday, the fourth-largest carrier posted a fiscal first-quarter loss of 175,000 total subscribers, a reverse of the gain of 57,000 net new subscribers in the year-ago period. In last fiscal year's fourth quarter, it lost around 8,000 subscribers. 

The company added 262,000 net data devices, which were offset by a 128,000 fall in phone users. This was a slight boost from the 169,000 net data devices added last quarter. Data devices include tablets, connected car devices, wearables and other devices. 

The first quarter of this fiscal year ended with 54.3 million subscribers, falling slightly behind last quarter's 54.5 million. 

Sprint also posted a net loss of $114 million, compared with a profit of $173 million in the year-ago period. Total operating net revenue came out at $8.1 billion, which was higher than the $8.06 billion Yahoo Finance analysts predicted. Wireless service revenue alone was $5.3 billion, which was a 3% decline year over year.

The results reflect the state of Sprint as it bides its time awaiting the merger with T-Mobile. The last-place national carrier has long lagged behind its larger rivals. The company has suffered from even weaker growth in the last few quarters after paring back a lot of its aggressive promotions.

"While we delivered good results in the first quarter relative to expectations, the business still faces several structural headwinds and I remain convinced the merger with T-Mobile is the best outcome for our customers, employees, industry and all stakeholders," Sprint CEO Michel Combes said in a statement. 

Sprint has 5G networks in five metropolitan areas: Atlanta, Chicago, Dallas-Fort Worth, Houston and Kansas City. It will launch New York City, Los Angeles, Phoenix and Washington, D.C. in the upcoming weeks and believes its 5G footprint will cover 11 million people and 2,100 square miles. Current 5G phones it has include the LG V50 ThinQ 5G and Samsung Galaxy S10 5G.

T-Mobile, on the other hand has 5G networks in six cities: Atlanta, Cleveland, Dallas, Las Vegas, Los Angeles and New York.

It's hard to say whether Sprint's chapter in telecommunications will close forever, as 14 states have joined forces in a lawsuit opposing the merger deal for fear of higher prices. The latest state to join the lawsuit is Texas. Texas Attorney General Ken Paxton on Thursday said he has an "independent obligation to protect Texas consumers," and to "preserve free market competition, which has proven to result in lower prices and better quality for consumers."

"We remain optimistic about the remaining regulatory steps," a Sprint spokesperson in an email. "Sprint and T-Mobile are prepared to vigorously defend against the State Attorneys General lawsuit filed to block the merger."

As part of the merger with T-Mobile, both companies will be branded as the "new T-Mobile," with T-Mobile CEO John Legere's team running the operations. Dish will receive a part of Sprint's 800 MHz spectrum and gain access to the "new T-Mobile's" network for seven years. 

Sprint won't host its customary analyst conference call to discuss its results. 

The company's shares fell 4.2 percent Friday, to $6.88. 

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Originally published Aug. 2, 6:37 a.m. PT
Update, Aug. 6: Adds comment from Sprint spokesperson.