uploads///Telecom Sprint Platforms Postpaid Net Additions

Sprint’s Customer Growth Strategy in the US Wireless Space

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Jun. 2 2016, Updated 5:06 p.m. ET

Sprint’s customer growth strategy

In terms of its customer base, Sprint (S) ranked as the fourth-largest US wireless player at the end of 1Q16. The top two players are Verizon (VZ) and AT&T (T), and the third largest is T-Mobile (TMUS).

In the recent J.P. Morgan Global Technology, Media, and Telecom Conference, Sprint’s (S) CFO, Tarek A. Robbiati, highlighted the Wireless Customer and Product segments the company is interested in selectively pursuing.

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Robbiati noted, “First, really make sure that we focus on the right type of customer acquisitions. It’s easy to grow your subscribers if you want to grow this with very low ARPU/APU machine-to-machine type of connections. That’s not what we intend to do. If you focus on handset gross adds and handset net adds, this is where the value is.”

He added, “And number two, really important to start to differentiate and segment the customer basis. We continue to focus on the prime credits type of customer and we do see some upside also in the subprime, provided that we manage the risk attached with subprime.”

Sprint’s postpaid customer growth

The pace of Sprint’s postpaid customer growth slowed in fiscal 4Q15. On a net basis, Sprint’s postpaid additions decreased YoY (year-over-year) to ~0.06 million during fiscal 4Q15 from ~0.21 million in fiscal 4Q14. Sprint lost ~0.04 million tablet connections on a net basis during fiscal 4Q15. On the positive side, Sprint added ~0.02 million postpaid phone connections in the quarter.

Fiscal 4Q15 was the third consecutive quarter that Sprint had phone net additions instead of losses in the category. Phone users, particularly smartphone users, are sought-after customers by wireless carriers. Users of smartphones such as Apple’s (AAPL) iPhones and Google’s (GOOG) (GOOGL) Android phones tend to use more data.

For diversified exposure to some telecom players in the US, you may consider the SPDR S&P 500 ETF (SPY). This ETF held a total of ~2.7% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) at the end of April 2016.

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