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Sprint's Whopping $1.6 Billion Loss Is 'Well-Timed Pain'

By Craig Galbraith
July 31, 2013 - News

Sprint may be hemorrhaging customers and losing a lot of money, but so far it's not having any impact on SoftBank, the Japan-based company that just bought more than two-thirds of America's third-largest wireless operator for more than $20 billion.

SoftBank's profit last quarter doubled compared to the same time last year, reaching $2.7 billion. SoftBank also added 810,000 new subscribers during the quarter, bringing its total to 33 million. Sprint, meantime, saw revenue remain flat, at $8.8 billion due in part to the burdens associated with shutting down its Nextel wireless network, which it acquired in 2005. Sprint's loss included a $430 million charge for accelerated depreciation of the Nextel network and $623 million in other similar charges.

“There’s pain, and then there’s well-timed pain," noted Yankee Group senior analyst Rich Karpinski, commenting specifically on an IDG News Service article. "For Sprint, [Tuesday's] earnings report – highlighted by a large quarterly loss and 2 million customer defections, largely as the result of the final shutdown of its Nextel network – is best described as the latter. The reason: With the pain and cost – both in terms of execution and focus – of shutting down Nextel behind it, Sprint and new parent SoftBank can now focus on hopefully brighter roads ahead."

One of those new roads is Sprint's purchase of Clearwire, which it wrapped just a few weeks ago. With that buy came a lot of spectrum that the carrier can use to expand its 4G LTE network and offer more high-speed services.

"Those roads will largely be paved with LTE, as Sprint [on Tuesday] also announced it has reached 40 new markets with LTE, bringing its total coverage to more than 150 cities. That network boost, along with its recent commitment to keep its unlimited service offer in place for the lifetime of existing customers, will be the linchpin of its next wave of customer acquisition efforts," Karpinski added. "In recent quarters, that focus has been on trying to retain Nextel customers, not entirely a winning proposition since those customers were first-attracted by push-to-talk voice services, and we now live in a largely data-centric world. But with a fresh cash and leadership injection from SoftBank, Sprint can now focus exclusively on competing for those smartphone- and data-minded customers. Sprint’s far from in the clear, but that clarity of purpose is what it needs right now to take its next step forward."

Follow senior online managing editor @Craig_Galbraith on Twitter.

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