Q1 2013 Earnings Call Transcript

Transcript Call Date 04/24/2013

Joseph J. Euteneuer - CFO: Thank you, Steve and thanks everyone for being here today. As I've discussed with you in the past, 2013 is a heavy investment year for Sprint as we aggressively expand our LTE footprint, enhance our 3G network and shut down the Nextel network as Steve just discussed, all of which is necessary to drive future growth. During this investment phase of our turnaround, we will remain very focused on profitability and I'm particularly pleased with our adjusted OIBDA result this quarter. We continue to make improvements to the Sprint platform operations as a result of employing a strategy of disciplined growth.

Moving to Slide 16; our Sprint platform postpaid business continued to show growth in both subscribers and revenues during the first quarter. Sprint platform postpaid net ads were 12,000 in the first quarter, including 264,000 recaptures from the postpaid Nextel platform. While net ads were positive, Sprint platform postpaid gross ads were down 20% year-over-year as a result of our continued focus on Nextel conversions and slowing industry decisions after an extremely strong fourth quarter. Even with our focus to balance more costly external acquisition with our Nextel recapture efforts, we are still able to maintain our share of gross ads.

During the last quarter, we continued to make progress on getting subscribers cleared from the Nextel platform and as of the end of the first quarter, we had just over 1 million postpaid subscribers remaining, almost all of which are business customers. As we have discussed over the last several quarters, our postpaid Nextel recapture rate will continue to decline as we approach complete shutdown on June 30th. Due to the fact that zero use and negative return on investment customers remain in the base until the end. As a result, we expect postpaid recapture rate to decline from 46% in the first quarter to 30% to 40% of the remaining postpaid subscribers in this last quarter of operation.

Sprint platform postpaid churn of 1.84% in the first quarter improved 16 basis points year-over-year. This improvement was driven by involuntary churn returning to more normal levels. So, almost all the subscribers remaining on the Nextel platform are business customers, we anticipate some pressure in the second quarter to Sprint platform postpaid churn from business accounts with lines of service on both Sprint and Nextel platforms that decide to terminate all lines as a result of not continuing service on the Nextel platform.

As we have discussed previously, we're also experiencing some adverse impacts to voluntary churn, which we expect are temporary related to our network vision deployment and therefore we continue to expect elevated churn for the next few quarters before we start to see gradual improvements from better network performance and expanded LTE coverage.

Moving to the rate component of revenue growth, Sprint platform postpaid ARPU of $63.67 for the first quarter was a new record as Dan mentioned and grew nearly 2% year-over-year due to continued penetration of our $10 premium data add on charge and ongoing initiatives aimed at reducing customer discounts and credits. Sequential growth also resumed this quarter as the fourth quarter of 2012 was negatively impacted by one time customer credits related to Hurricane Sandy. With continued smartphone penetration, we continue to expect ARPU on the Sprint platform to grow throughout 2013 but at slower rates than in 2012.

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