Sprint Beats Q3 2011 Estimates, Looks Ahead to iPhone Impact [Updated]
Sprint today announced financial results for the third quarter of 2011, and while the carrier did not begin offering the iPhone until after the quarter ended, it was still able to beat analyst estimates and report a smaller-than-expected loss. Perhaps most significantly, Sprint reported a net gain of 1.3 million subscribers during the third quarter, the carrier's best performance in over five years.
Sprint also took the opportunity to tout the iPhone in its press release, citing the device's record-breaking launch and the expectation that iPhone customers will be among the carrier's most profitable.
Growth in Sprint brand net additions was achieved without the benefit of Apple’s iPhone 4S and iPhone 4, which launched Oct. 14. The launch of this iconic device resulted in Sprint’s best ever day of sales in retail, web and telesales for a device family in Sprint history. The response to this device by current and new customers has surpassed initial expectations. The iPhone is expected to be accretive for Sprint, and iPhone users are expected to be among Sprint’s most profitable customers.
Overall, Sprint reported a loss of $301 million for the third quarter, down from a $911 million loss in the year-ago quarter. The carrier is said to have committed to purchase over 30 million iPhones over the next four years, with the upfront costs potentially resulting in Sprint taking an initial hit to its financial numbers. But with Sprint expecting strong profits from iPhone service contracts, the carrier anticipates that the iPhone will be a strong contributor to improved financial performance over time as it recoups its initial outlay.
Update: Sprint CEO Dan Hesse reported to Reuters that Sprint will need $7 billion in new financing over the next few years in order to support the iPhone commitment and the network transition to LTE.
Sprint said that while the iPhone would cost the company $15 billion in the next four years, it would generate $7 billion to $8 billion in projected future value for Sprint over that period.
Sprint said it will pay Apple an iPhone subsidy that is 40 percent higher, or $200 more per device, than the subsidies it pays for other phones.
But the company's executives said it should be worth the extra cost as the device is bringing in new customers.
"IPhone has an expensive contract but is worth every penny," Hesse said.
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