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Sprint's trick to making money: A year of free of service

As counterintuitive as it sounds, Sprint posts its first profit in three years in the same quarter that it began giving away its service.


Sprint is finally back in black. 

The nation's fourth-largest wireless customer has posted a quarterly profit for the first time in three years. In its fiscal first quarter, the company also added a net 61,000 new customers, although that was a significant drop-off from a year ago. 

"This represents the progress of a turnaround journey that has delivered improvements in postpaid phone and prepaid customer growth, a return to top-line growth, and a significantly transformed cost structure," CEO Marcelo Claure said in a statement Tuesday. 

The company pulled out all the stops this past quarter. In mid-June, it began offering a year of unlimited data for free to anyone willing to switch to its service. The following week, Sprint's pre-paid arm, Virgin Mobile, said it would provide a year of service for $1 -- and only sell iPhones. 

The deals further underscore the fact that it's a pretty sweet time to be a wireless customer. Verizon is trumpeting a competitive unlimited data plan, and AT&T is even throwing in HBO for free. 

Sprint has the extra challenge of convincing customers that its network isn't what it used to be, and that the improvements to its service are worth a second look. Hence the aggressive promotions. 

The Overland Park, Kansas, provider lost a total 39,000 net postpaid customers, or people who pay at the end of the month and are generally considered more valuable customers. That's likely due to the loss of tablet customers, as the company added 88,000 net new phone customers. The figure is well below the 173,000 net new phone customers it added a year ago. 

Its prepaid business, likely helped by the new Virgin plan, signed up a net 35,000 new customers, compared with a loss of 306,000 customers from a year ago.   

Some customers may be wary of Sprint since it's unclear it'll be around in its current form. Rumors continue to swirl about potential deals with everyone from wireless rival T-Mobile to cable provider Charter Communications. Sprint's parent, Japanese carrier SoftBank, is considering a bid for Charter, according to Reuters. This comes after The Wall Street Journal said that Charter wasn't interested in Sprint. 

A Sprint spokesman wasn't available for comment on any potential deal. 

Sprint posted a fiscal first-quarter profit of $206 million, or 5 cents a share, compared with a year-earlier loss of $302 million, or 8 cents a share. Revenue rose 2 percent to $8.16 billion.

The company said it expects to save an additional $1.3 billion to $1.5 billion in lower costs through fiscal 2017. 

Sprint shares rose 2.5 percent to $8.20 in pre-market trading on Tuesday.