Sprint haemorrhages lucrative mobile phone customers

Sprint continued to lose the most lucrative mobile phone customers and burnt through cash in its latest quarter, as the third-largest US wireless network attempts a tricky turnround that is being hampered by competition from T-Mobile US.

The wireless group recently became part of the telecoms empire built by Masayoshi Son, the Japanese billionaire, and has become a significant drag on the performance of its parent company SoftBank, which has an 80 per cent stake.

Sprint reported a loss per share of 6 cents in the first three months of the year, in line with analyst expectations, and burnt through cash, with net debt rising by $900m to $29.6bn - more than its market capitalisation of $20bn.

"If we need more cash we can always sell spectrum [the airwaves used to deliver wireless services], issue cash or go to the bond markets. And we have a very large shareholder who is very supportive . . . at the moment of truth, if the company needed more money, I think he would provide it," Marcelo Claure, Sprint's chief executive, told the Financial Times.

Some analysts questioned how long Sprint will be able to sustain its turnround plan in the absence of asset sales or some sort of cash injection from Mr Son.

Jonathan Chaplin, an analyst at New Street research, said Sprint could raise more than $12bn from selling excess spectrum.

Mr Claure said Sprint was "getting offers for the spectrum, which becomes an additional source if and when we need it. It's nice to be in a position where you have something everyone wants."

The company has been haemorrhaging customers for seven years after a botched network upgrade led to a surge in dropped calls, and Mr Son had hoped to revive its fortunes by combining with T-Mobile US in 2014. However, regulators indicated they would not approve the deal.

Mr Son responded by installing Mr Claure, a trusted executive, to try to turn round the company as a standalone business. Since then Sprint has cut 2,000 jobs, opened 1,400 concessions in RadioShack stores, and tried to lure new customers with steep price cuts.

However, its efforts have been hampered by a resurgent T-Mobile, the smallest of the US networks. In the first three months of 2015, T-Mobile was the only group to add the most coveted "postpaid" phone customers, who are billed for their wireless service on a recurring monthly basis.

Sprint lost a net 201,000 postpaid phone customers in the quarter, compared with a gain of 991,000 at T-Mobile, while Verizon and AT&T, the largest carriers, lost 138,000 and 270,000 respectively.

For Sprint, a net loss of 201,000 is a much better than recent performances: in the same period of last year, it lost 693,000 of these users. There were also other positive signs, with the "churn" rate at which customers left its network falling to 1.84 per cent, an improvement from the previous quarter when it stood at 2.3 per cent.

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Sprint reported adjusted earnings before interest, tax, depreciation and amortisation of $1.7bn, a decline of 5 per cent on a year earlier, although the figure was flattered by a new leasing plan that allows it to recognise revenue from handset sales more quickly. Revenue of $8.3bn was around $175m shy of expectations.

Craig Moffett, an analyst at MoffettNathanson, said adjusted ebitda would have been around $600m lower still were it not for the accounting change.

"The brutal economic impact of engaging in a price war can be painted over on the income statement with the help of a glossy coat of favourable accounting treatment. But the damage to the balance sheet is impossible to miss," added Mr Moffett.

Mr Moffett predicted that Sprint would "run out of money" in the second quarter of 2016.

Shares in the company were down 1 per cent by lunchtime in New York, although they are up by more than 25 per cent so far this year.

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