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Sprint’s iPhone in 4Q: Good and Bad

Sales of the iPhone helped Sprint Nextel Corp. grow its subscriber base in the fourth quarter.

In its best quarterly result in six years, Sprint added 1.6 million subscribers to end the year with about 55 million customers.

Sprint, the third-largest U.S. wireless operator, reported that 40 percent of its 1.8 million iPhone sales were to new customers.

Apple’s device, however, is expensive for Sprint to subsidize, and the carrier said the combined impact of iPhone and Network Vision costs reduced its OIBDA (Operating Income Before Depreciation and Amortization) margin by about 8.8 percentage points. Sprint has a minimum commitment to buy $15.5 billion in iPhones over four years, and the company has said it would pay Apple a subsidy that is 40 percent higher, or $200 more per device, than what it pays for other phones, according to an Oct. 26 article in Reuters.

In the fourth quarter, Overland Park, Kan.-based Sprint also posted a wider net loss of $1.3 billion, compared to a loss of $929 million in the year-ago period.

Consolidated net operating revenues grew 5 percent to $8.7 billion from $8.3 billion in the year-ago quarter.

Sprint CEO Dan Hesse specifically mentioned “iconic devices like the iPhone” when describing fourth-quarter results.

Sprint began selling the iPhone 4S in October 2011, putting the company in a better position to compete with its larger competitors, AT&T and Verizon Wireless.

In spite of growing its customer base, Sprint said its postpaid churn rose sequentially and year over year, although Sprint characterized the increase as temporary. Sprint cited “higher involuntary deactivations which occur when Sprint disconnects a customer due to lack of payment or violations of terms and conditions.”


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