Sprint returns to customer growth amid loss; plans to cut 2,000 jobs

First quarter for new CEO Marcelo Claure was a rocky one, with growth largely driven by the carrier's wholesale business, but there were signs of progress.

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.
Expertise Mobile, 5G, Big Tech, Social Media Credentials
  • SABEW Best in Business 2011 Award for Breaking News Coverage, Eddie Award in 2020 for 5G coverage, runner-up National Arts & Entertainment Journalism Award for culture analysis.
Roger Cheng
4 min read

A dizzying array of promotions by Sprint helped slow customer defections, but the company continued to sink into the red.

Sprint's results show that there's still a lot of work to be done at the company. Lynn La/CNET

The Overland Park, Kan., company posted a fiscal second-quarter loss of $765 million, or 19 cents a share, on revenue of $8.5 billion. Analysts had projected a loss of 6 cents a share and revenue of $8.6 billion.

Sprint, a unit of Japanese carrier Softbank, has suffered through more than a year of customer losses. But the company was able to eke out a gain thanks to its wholesale business, in which other businesses sell Sprint wireless services under their own name. In total, Sprint added a net 590,000 customers, though its Sprint branded service lost a net 272,000 customers.

The results underscore the importance of the reputation for network quality. Larger rivals Verizon and AT&T have been able to keep their customer base growing and justify a premium for their services because of the breadth and speed of their networks. T-Mobile has turned itself around through a combination of savvy marketing, which touts its rapidly improved network. Sprint, which has been slow to upgrade its network, has struggled to give customers reasons to stick around.

The stark difference in reputation has Sprint more willing to offer deals that include lower prices and more data, all in a bid to attract the attention of consumers who may have otherwise overlooked the carrier. The different deals are the brainchild of new CEO Marcelo Claure, who took the reins in August and has taken a relentless pace in introducing new offers.

"We have started a transformational journey," Claure said in a statement.

As part of that transformation, Sprint said it is cutting 2,000 jobs, which it believes will yield $400 million in annual savings. With Sprint's employee base of 31,000, the cuts amount to about 6 percent. It's part of a broader plan to cut its annual costs by $1.5 billion from 2014 levels.

The company also launched a management review, suggesting a shake-up in the upper ranks. Parent Softbank may contribute talent, as it did with last week's appointment of Junichi Miyakawa as Sprint's technical chief operating officer.

Shares of Sprint rose 27 cents, about 5 percent, to close at $6.20 on Monday. In after-hours trading, the stock fell about 7 percent.

The bright spot for Sprint in the period was wholesale, which added a net 827,000 new customers. Prepaid also eked out small gains, adding 35,000 new customers, as it works through the loss of low-income customers under government-subsidized wireless service. On the Sprint side, the gain of 261,000 tablet customers was offset by the loss of 500,000 phone customers.

Claure blamed the higher losses on the implementation on higher credit standards that caused subscribers with lower credit scores to be kicked out of the service. The company is focused on improving the quality of its customer base to avoid further customer turnover in the future.

Claure is working to get Sprint competitive again with a number of different offers. Shortly after he took office, Sprint introduced an individual unlimited plan for $60 a line, as well as a family share plan with more data than its competitors. It also has an iPhone-leasing program for $20 a month, which can be paired with a special $50 unlimited plan. He has also been aggressive in responding to the competition, vowing to double the amount of data that rival AT&T offered after it introduced its own promotion.

The company said some of the early moves are working. The number of new customers willing to sign up for post-paid service, which is when you pay at the end of the month, grew 37 percent month over month in September, and increased over a year ago for the first time in 2014. The postpaid net losses also slowed nearly 60 percent in September.

The shake-ups might not be done. Claure said on an investor conference call that he is mulling over eliminating phone subsidies next year.

Sprint plans to return to post-paid net additions in the current quarter, Chief Financial Officer Joe Euteneuer said in an interview on Monday. But that figure would include growth from tablets as well. He wouldn't say when the company would return to net additions on post-paid phones, only saying it was a focus of the company.

"The fourth quarter will be the most heated competition ever," he said. "If we can fare well after that, I'll feel more comfortable."

While Sprint touted its most successful iPhone launch, the iPhone has historically been a bad quarter for the company. While AT&T and Verizon tend to see higher activations of customers buying a new iPhone, Sprint has typically lost out as its subscribers use a new iPhone as the reason to jump ship. This time around, Sprint also had to deal with a revitalized T-Mobile as well.

Overall, Sprint's loss was only slightly wider than its year-earlier loss of $699 million, or 18 cents a share. Revenue rose 9.5 percent to $8.5 billion.

Sprint expects full-year adjusted earnings before interest, taxes, depreciation and amortization to be between $5.8 billion and $5.9 billion, below a prior estimated range of $6.7 billion to $6.9 billion.

Updated at 3:25 p.m. PT: To include additional background, executive comments.