Sprint adds 1.1 million customers as costly comeback takes hold

CEO Marcelo Claure has changed up the service plans and upgraded the wireless network. That's led to improving customer growth, but also financial losses.

Roger Cheng Former Executive Editor / Head of News
Roger Cheng (he/him/his) was the executive editor in charge of CNET News, managing everything from daily breaking news to in-depth investigative packages. Prior to this, he was on the telecommunications beat and wrote for Dow Jones Newswires and The Wall Street Journal for nearly a decade and got his start writing and laying out pages at a local paper in Southern California. He's a devoted Trojan alum and thinks sleep is the perfect -- if unattainable -- hobby for a parent.
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Roger Cheng
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Sprint CEO Marcelo Claure has spent more than a year turning the business around.

Troy Thomas/Sprint

Exactly one year ago on his first earnings conference call with investors, Sprint CEO Marcelo Claure said he would take the ailing wireless carrier on a " transformational journey."

Claure, who took over in August 2014, promised to "take bold actions" to win back customers burned by years of spotty and slow cellular coverage. He's kept his word. Over the next few months, he overhauled the wireless carrier's phone plans so customers didn't need an accountant to break them down. He introduced the concept of leasing a smartphone (since emulated by others, including Apple). He even had customer service reps deliver mobile devices to your home.

So where is Sprint on this journey?

"If this is a marathon, we are one-third there," Claure said in an interview on Tuesday.

Customers are indeed returning to Sprint. Its growth, however, hasn't been fast enough to fend off T-Mobile, which during the summer overtook Sprint as the nation's third-largest wireless carrier. And Claure's journey has been expensive, with the company losing money in every quarter that he has served as CEO.

Still, the Overland Park, Kansas, company hit a key milestone on Tuesday by reporting that it added 237,000 so-called postpaid smartphone customers, or folks who pay their bills at the end of the month and tend to have higher credit scores, for the three months that ended in September. It's the first time in more than two years that the company returned to growth in the postpaid segment, which is an indicator that consumers are starting to feel more confident about Sprint's service and that its lower prices are drawing in bargain seekers.

Welcome to the new wireless world, where carriers are bending over backwards to win you over. In the last quarter, Sprint offered to give DirecTV customers a free year of service, a shot at AT&T, which acquired DirecTV in July in the hopes of getting its its satellite TV customers on the AT&T wireless network too. In September, Sprint said any customers willing to trade in their existing iPhone 6 would pay only $1 a month for an iPhone 6S, as part of its "iPhone Forever" program.

But the losses continue to pile up. On Tuesday, the company posted a fiscal second-quarter loss of $585 million, or 15 cents a share, on revenue of $7.98 billion. That's worse than the per-share loss of 8 cents and revenue of $8.14 billion investors had expected, according to Thomson Reuters. The company also lowered its full-year forecast to the low end of its previous range.

Sprint shares fell 7.6 percent to $4.48.

Customers, however, did stick around longer, as its customer turnover rate in the postpaid segment fell to 1.54 percent from 2.18 percent a year ago. "It's a dramatic change in the trajectory of the company," Claure said on a conference call with analysts on Tuesday, noting that the rate was the lowest in the company's history.

In an interview, Claure offered a preview of the next quarterly results, noting that October was the company's best month in years in regards to customer growth.

In total, Sprint added 1.1 million customers in the fiscal second quarter, largely driven by its wholesale agreements with reseller partners such as Tracfone.

Its growth again wasn't enough to outpace T-Mobile, which added 2.3 million customers, or Verizon's 1.3 million new customers. AT&T added 2.5 million customers, but its growth was propped up by 1 million connected cars.

For Claure, heading deeper into his second year as CEO, the results signal progress as the company starts to get consumers to notice again.

"This quarter marked an inflection point in our turnaround journey," he said in a statement.

Updated at 8:40 a.m. PT: To include comments from the CEO.