Sprint Fends off iPhone Challenge, Adds Subscribers

Despite the introduction of the iPhone (s aapl) on Verizon (s vz) in January, Sprint (s s) managed to hold its own and actually improved in almost every way in the first quarter, adding 1.1 million net wireless subscribers, reducing its churn to record levels and improving average revenue per user. The showing is a sign of hope for the third-place carrier as it attempts to claw its way back to profits in the wireless market that could get even more difficult should AT&T (s t) swallow up T-Mobile. 

In the first quarter, Sprint topped analysts’ projections with revenues of $8.3 billion, up 3 percent over the same quarter a year ago. The operator also narrowed its net loss to $439 million from $865 million a year ago. Sprint enjoyed a boost in average revenue per user, with postpaid ARPU increasing from $55 to $65 year over year while prepaid ARPU also increased modestly to $28 compared to $27 a year ago.

Some of the best news was in subscriber numbers, with Sprint adding a record 846,000 net prepaid subscribers along with 310,000 net postpaid subscriber additions for the Sprint brand. Overall, however, Sprint lost 114,000 net postpaid subscribers, largely on the iDEN network, though it was a big improvement over the year before when it lost 464,000 post paid subscribers. The company is also keeping its customers longer; its postpaid churn was reduced to a company-best of 1.81 percent, compared to 2.15 percent for the same period a year ago and 1.86 percent in the fourth quarter of last year.

The overall numbers suggest Sprint handled the introduction of the Verizon iPhone well and was also able to deal with the price cuts by AT&T on the iPhone 3GS, which was reduced to $49. Sprint’s share of gross additions along with AT&T and Verizon in the first quarter was 22.1 percent, according to Bernstein Research, roughly flat from last year, but a solid performance considering the excitement around the Verizon iPhone.

Still, dangers lurk for Sprint. The merger with T-Mobile and AT&T, if it gets the approval of regulators, could put more pressure on Sprint, which would become a more distant third-place rival. The iPhone also is a threat for Sprint as long as it remains exclusive to AT&T and Verizon, though it’s something Sprint was able to handle initially, said Hesse.

“The iPhone does continue to be a significant competitive threat to us, first in the hands of AT&T and then in the hands of Verizon,” said Hesse on a conference call. “So the iPhone continues to be quarter after quarter a successful device and one that provides very strong competition to Sprint, but needless to say Verizon’s introduction of their new iPhone in Q1 this past quarter did have a notable impact on our net add performance for the quarter.”

Sprint also has to sort out its 4G plans and how it proceeds with Clearwire. It recently resolved a wholesale pricing dispute with Clearwire but it’s still unclear what kind of longterm relationship it sees with the WiMAX provider, which it owns a majority stake in. Still, the latest results are a nice sign for Sprint and may mean more competitiveness out of the carrier going forward. With the market potentially dropping to three major operators, a resurgence by Sprint would be welcome.