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By Rob Garretson
Sprint Nextel reported its first quarterly net subscriber growth in three years and its lowest-ever postpaid churn rate, fueled in part by the popularity of its first 4G smartphone, the HTC EVO.
Still, the nation's third-largest wireless carrier posted a net loss of $760 million -- including a $302 million tax-related charge -- in the three months ended June 30, compared to a $384 million net loss in the 2009 second quarter. Net operating revenues totaled approximately $8.0 billion for the quarter, a 1 percent decline from the $8.1 billion generated in the year-ago period, primarily due to lower postpaid wireless service revenues and wireline revenues.
Sprint reported a gain of approximately 111,000 net wireless subscribers, citing demand for smartphones like the HTC EVO 4G and BlackBerry Curve. The company had net retail subscriber declines of 55,000, which was more than offset by net additions of 166,000 wholesale and affiliate subscribers. Sprint's postpaid losses are a sharp improvement from the 991,000 postpaid subscribers it lost in the 2009 second quarter and the 578,000 subscribers lost in the 2010 first quarter. About 9 percent of postpaid customers upgraded their handsets during the quarter, leaving the carrier with 48.2 million total subscribers as of June 30.
"The better-than-expected postpaid churn represents less than 100,000 customers who decided not to churn," BTIG analyst Walter Piecyk wrote in a research note to investors. "We believe this was likely driven by the success of the EVO launch during the quarter."
Sprint reported its return to subscriber growth just days after the largest wireless carrier, Verizon Wireless, and the second largest carrier, AT&T Mobility, each reported net subscriber additions of 1.6 million.
Sprint in June debuted its first 4G smartphone, the HTC EVO, which runs on Clearwire's mobile WiMAX/4G network as well as the Sprint 3G network. Sprint Nextel CEO Dan Hesse told Wall Street analysts in the company's earnings conference call that sales of the device have been "fantastic," and that the carrier is struggling to meet demand for the smartphone.
Sprint is betting heavily that the faster 4G network being deployed by its affiliate Clearwire is a way to gain subscribers from Verizon and AT&T. But Sprint doesn't have direct control over how the 4G network is built and hasn't been able to get sufficient supply of the EVO 4G phones from HTC to exploit its 4G head start.
"The supply issue is a big deal for us," Hesse added in the Wednesday conference call, noting that the EVO smartphone is one way Sprint can keep customers from switching to AT&T for the new iPhone 4. In its earnings announcement last week, AT&T said it had activated a record 3.2 million iPhones on its network in the quarter.
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