Sprint on Tuesday gave a glimpse into its third quarter earnings results that showed strong postpaid net additions and wireless revenue growth that beat expectations.
In a filing with the Securities and Exchange Commission, Sprint said it pulled in 344,000 net postpaid additions and 347,000 net postpaid phone additions in the quarter. The carrier also said its third quarter total net operating revenues grew three percent year over year to hit $8.25 billion while wireless net operating revenues jumped five percent to $7.85 billion. Total postpaid churn was reported at 1.52 percent while postpaid phone churn was 1.37 percent.
Sprint’s reported figures were well above predictions of 275,000 and 233,000 postpaid net phone additions from Wells Fargo and Wall Street, and also topped wireless revenue estimates of $7.6 billion from both Wells Fargo and Wall Street.
According to Wells Fargo Senior Analyst Jennifer Fritzsche, the deviation from expectations is significant – especially on the wireless revenue front.
“This is a HUGE deal because wireless revenue showed annual growth only 1 time in last 8 reported quarters,” Fritzsche wrote in a Tuesday research note. “S is clearly gaining operational momentum in terms of sub growth. Recall, we were the highest on the Street in terms of postpay net adds (raised numbers on 10/14) and the company still beat us by almost 75K. In our view, Sprint’s value message and improved network experience is beginning to resonate with customers.”
But it wasn’t all upside for Sprint and not everyone had a rosy evaluation of the report.
The carrier also reported 427,000 prepaid net losses – a figure that was significantly higher than Wells Fargo’s estimate of 250,000 prepaid losses.
In a Tuesday research note, MoffettNathanson’s Craig Moffett said the report shows Sprint remains stuck in “crosswinds” between a number of metrics including pre- versus postpaid and subscriber growth versus ARPU. Moffett also said questions remain around the carrier’s free cash flow and solvency, and revived questions around Sprint’s capex spending.
Sprint said it spent just $828 million on capital expenditures in the third quarter, including $470 million on its network.
According to Moffett, the low capex spending highlights the carrier’s “precarious position as it navigates investment in growth while simultaneously juggling liquidity concerns.”
“Sprint is unambiguously under-spending on capex, starving the future for cash flow in the present,” Moffett wrote. “No one would argue that Sprint’s current level of capital spending is sustainable (not even Sprint)…but no one really knows what the future will require.”
