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Sprint Service Revenue Dips Due to Postpaid Customer Phone Losses

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EBITDA increases 14% YoY

Sprint’s (S) earnings before interest, tax, depreciation, and amortization (or EBITDA) increased by 14% year-over-year (or YoY) as expense reductions offset the declining operating revenues, as seen in the chart below.

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Retention of postpaid customers

In 1Q15, Sprint (S) made significant progress on retaining postpaid customers. Net additions in terms of postpaid customers were 310,000 in comparison to net losses of 181,000 for 1Q14. However, the prepaid segment saw a net loss of 366,000 customers in comparison to a net loss of 542,000 in 1Q14.

Postpaid net additions stood at -32,000, 321,000, and 760,000 for peer companies AT&T (T), Verizon (VZ), and T-Mobile (TMUS), respectively.

Churn of postpaid customers

Continuous improvement in customer experience, along with better network performance, allowed Sprint to make significant progress on retaining valuable postpaid customers. Sprint also witnessed a record low postpaid churn rate of 1.56%, an improvement of 49 basis points year-over-year (or YoY).

“Over the past year, Sprint has made meaningful progress in our turnaround by improving our network performance and enhancing our overall value proposition,” noted Sprint CEO Marcelo Claure. “As a result, we hit significant milestones during the quarter by posting the company’s lowest-ever churn and recording postpaid phone net additions in both May and June, as well as for a third consecutive month in July. Going forward, we are confident in our plan to leverage our unique spectrum assets to make our network a competitive advantage, aggressively reduce operating costs, and utilize our business relationships and assets to fund our turnaround.”

Postpaid phone losses

Service revenues declined $7.03 billion in 1Q15 in comparison to revenues of $7.68 billion in 1Q15. This was mainly due to postpaid customer phone losses and a higher mix of device financing, where a part of the revenues is shifted to the equipment segment.

For 1Q15, postpaid phone losses were recorded at 12,000. However, for the first time in the last eight quarters, Sprint recorded net additions in May and June. Equipment revenue segment saw a decline due to a shift from installment billing sales, which recognize revenues at the point of sale in comparison to leasing sales that recognize revenues over time.

Sprint (S) comprises 3.90% of the iShares US Telecommunications ETF (IYZ) and 0.03% of the iShares Russell 1000 Value ETF (IWD).

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