Sprint Nextel managed to stem the exodus of its wireless subscribers to other carriers for the first time in three years in the second quarter, when it posted the addition of 111,000 net wireless subscribers.
The swing into the black came on the strength of Sprint's prepaid and wholesale businesses, which helped offset weakness in the company's postpaid segment.
Sprint lost 228,000 postpaid customers despite a decrease in the segment's churn rate, which hit an all-time low of 1.85 percent. BTIG Research analyst Walter Piecyk attributed the improvement in Sprint's postpaid churn to the launch of the Evo, the carrier's first 4G smartphone.
Offsetting the loss in postpaid, the company added 173,000 prepaid customers and 166,000 wholesale and affiliate subscribers in the second quarter.
In a statement, Sprint CEO Dan Hesse emphasized the company's prepaid business. "We re-launched the Virgin Mobile brand, introduced Common Cents Mobile in about 700 Wal-Mart stores this quarter, and we are encouraged by the customer response to Assurance Wireless, our government-subsidized program for qualified customers who need reliable wireless service," he said.
Bernstein Research analysts expressed concerns about heavy subscriber losses on Sprint's iDEN network, where they said the company's Boost brand remains focused. Sprint's iDEN network lost almost 364,000 customers, while its CDMA network added about 136,000 postpaid customers.
Calling the U.S. wireless market an "unforgiving venue for a turnaround," Bernstein analysts said that "the sustainability of Sprint's turnaround story remains relatively weak."
Postpaid ARPU came in at $55 for the second quarter, a slight decline from last year's ARPU of $56. Prepaid ARPU was about $28, compared with $34 last year. Sprint said the year-over-year decline is due to the inclusion of Virgin Mobile and Assurance Wireless customers who have lower ARPU on average than that of Boost Mobile customers.
Overall, Sprint lost $760 million, or a loss of 25 cents per diluted share, on sales of $8 billion during the second quarter ended June 30. The losses were substantially higher than during the same period last year, when the company lost $384 million on sales of $8.14 billion. Sprint's wireless subscriber base now stands at 48.17 million.
Looking ahead, the company said its net adds will remain positive for the rest of 2010 as losses in its postpaid base taper off from the first half of the year.