Sprint PCS Sets Wireless Pace
It's amazing the noise 1.2 million new users can make.
Sprint PCS (PCS) on Thursday announced that revenue in the December quarter increased 84% from the prior-year period, driven by the addition of 1.2 million subscribers in the quarter. Sprint continues to set the pace in the wireless industry: Roughly 1 out of 6 new cellular phone users selects its service. Sprint's strong performance is highlighted best by the growth in EBITDA (earnings before interest, taxes, depreciation, and amortization), which outpaced that of sales; more customers and scale efficiencies combined to improve EBITDA by $522 million from a year ago, to $21 million in the quarter. Management anticipates 4 million new subscribers and a $1.6 billion improvement in EBITDA in 2001.
What It Means for Investors
As Sprint chalks up quarter after quarter of torrid subscriber growth, we grow increasingly confident of its position near the top of the wireless industry. We particularly like the fact that Sprint increased monthly average revenue per user (ARPU) by a couple of bucks from a year ago, despite adding so many subscribers. The reason that more subscribers are spending more money is simple: 50% of Sprint's customers, including its growing number of corporate clients, have signed annual contracts. These contracts promote behavior that tends to increase ARPU, like higher minutes of use and a lower rate of customer disconnect.
Todd Bernier does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.