Sprint’s subscriber and revenue losses will continue to plague the operator in H2 2014 due to the lack of differentiated offerings and a competitive market, said telecom analysts.
Sprint will be unable to grow revenue and subscribers in H2 2014 as it continues to be pressured by an anemic wireline business and strong competition in the postpaid market. Sprint lost 864,000 total retail subscribers in Q2 2014 and reported a year-to-year decline in corporate and wireless service revenue, yet the wireless business grew 0.2 percent in Q2 2014 due to its growing wireless equipment revenue.
To improve subscriber retention, Sprint’s primary focus remains on building out its Sprint Spark initiative and migrating its existing subscribers onto more lucrative postpaid LTE plans. Network Vision and additional layoffs will start to bend the cost curve down in H2 2014, at which point Sprint will show consistent margin growth.
Sprint will invest in Network Vision and Sprint Spark initiatives to catch up in LTE coverage and network speeds.
Sprint is focusing its capex spend toward completing its Network Vision deployments and expanding its Sprint Spark service footprint. Sprint trailed AT&T and Verizon in LTE coverage ending Q2 2014, yet Sprint surpassed its mid-year goal of 250 million LTE POPs with a total of 254 million LTE POPs in 488 cities. Sprint completed its 3G and voice network overhaul in Q2 2014, which will help improve network quality and reliability, yet TBR does not expect this to impact the operator’s continued postpaid subscriber losses in H2 2014.
Sprint will rely on enhanced network services to attract new subscribers over the next two years. Sprint Spark is now available in 27 markets and will continue to expand to additional cities through H2 2014. HD Voice is now available across Sprint’s entire footprint, and 16 million subscribers have HD Voice capable devices.
These services will enhance Sprint’s customers network experience, yet do not significantly differentiate Sprint from the other Tier 1 competition, who are also launching faster LTE networks and VoLTE services in H2 2014. Sprint will continue to lose subscribers to competitive offerings until it can more widely roll out Sprint Spark which will provide an opportunity for it to distinguish its network.
Sprint will drive tablet and Framily plan adoption to increase data revenue and long term ARPU growth.
The industry shift towards increased tablet sales in evident across multiple Tier 1 operators, as Verizon, AT&T and Sprint all reported high tablet additions over the past two quarters. This trend is helping to offset the decline in basic phone subscriber losses; though Sprint continues to be unable to grow its overall phone subscriber base as smartphone additions were unable to match basic phone losses. Sprint’s 245,000 postpaid net losses in Q2 2014 were a direct result of high branded phone subscriber losses, which totaled 646,000 during the quarter. This more than offset strong growth in branded tablet net additions, which rose 535,000 in Q2 2014.
The result of increased tablet additions, in addition to postpaid price reductions, is negatively impacting Sprint’s ARPU. This trend will continue through H2 2014 and TBR believes it will result in total ARPU dropping below $50 in 3Q14. To combat the decline in ARPU, Sprint will drive customer adoption on its Framily plans which will help increase long term data revenue growth. The tablet subscribers will also drive increased LTE data usage, which will strengthen Sprint’s data ARPU over the next two years.
Eric Costa, telecom analyst, Technology Business Research
editor@telecomlead.com
