Comment from Eric Costa, Telecom Analyst, Networking & Mobility Practice,Technology Business Research (TBR) on Sprint’s 4Q14 earnings.
Sprint faces a long road to recovery for both consistent revenue and postpaid subscriber growth as the U.S. price war continues into 2015
Sprint remains in rebuild mode entering 2015, with a focus on turning around its postpaid subscriber growth to help improve wireless revenue and margin growth. The operator showed signs of progress in 4Q14 with improved subscriber retention and strong prepaid growth. However, Sprint continued to trail far behind the Tier 1 competition in terms of postpaid net additions. In addition, both consolidated and wireless revenue fell, resulting in slightly lower EBITDA margins year-to-year.
Sprint’s 2015 strategic focus will be on rebuilding its wireless subscriber base through aggressive pricing promotions. Sprint will reduce unnecessary operating expenses to sustain its margins, helping to offset the negative impact its pricing strategies will continue to have on ARPU. Sprint will also expand its Sprint Spark service to new markets to offer increased speeds in major markets. Despite these improvements, TBR believes Sprint will remain weak compared to the industry competition through 2015.
Sprint will focus on offering differentiated and competitively priced plans to turn around its postpaid subscriber base in 2015
Under the leadership of its newly-appointed CEO, Marcelo Claure, Sprint initiated a more competitive pricing strategy in 2H14, as the carrier’s previous Framily plans failed to generate consistent postpaid subscriber growth over the past few years. New offerings, such as Family Share Pack plans, along with iPhone and iPad leasing programs, will result in higher postpaid subscriber retention in 1H15, though continued phone losses will have a negative impact on ARPU and wireless service revenue. Sprint’s postpaid subscriber growth continues to be driven by its tablet segment, which grew by 189,000 net additions in 4Q14. This partially offset a decline of 205,000 net phone losses in the quarter.
Sprint launched its most aggressive pricing initiative yet in December, the Cut Your Bill in Half promotion, targeted at AT&T and Verizon customers. The program offers these customers a similar service plan at half the cost of their current plan but requires subscribers to turn in their current devices to Sprint and purchase an unsubsidized device. TBR believes the promotion will be more successful retaining subscribers and attracting lower-end customers using inexpensive devices, yet will be less effective in drawing in higher end-customers, such as iPhone users. Total savings for higher-end customers may be minimal as they will need to purchase an expensive unsubsidized handset which may potentially offset the discount on their service plans. To attract T-Mobile customers, Sprint began offering in January a $200 minimum trade-in device value to new subscribers switching from T-Mobile.
Source: TBR
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