Blog Post

So Far the Palm Pre Isn't Helping Sprint

02Sprint (s S) this morning said its loss widened in the second quarter over the same period last year and that it lost even more subscribers this quarter than in the first three months of 2009. Those hoping that the Palm (s palm) Pre, which hit store shelves at the start of June, would help the carrier are likely shaking their heads at Sprint’s consistent red ink. The only bright spot was its Boost prepaid cell phone business, which may face its own issues in the coming months as Sprint plunks down $483 million to buy Virgin Mobile USA — a deal it announced yesterday.

Sprint’s revenue fell 10.2 percent to $8.14 billion for the three months ended June 30 from $9.06 billion a year ago, and reported a loss of $384 million. That’s 11.6 percent wider than its loss of $344 million in the second quarter of 2008. About 257,000 customers defected from Sprint, leaving the carrier with 48.8 million subscribers. Of them, 991,00 were postpaid subscribers, who sign annual contracts. Their departure was offset by the gain of 938,000 prepaid customers on the Boost service that mostly use the carrier’s iDEN network.

Sprint has long been telling the market that it’s getting its financial house in order, yet despite a offering a service that is increasingly in high demand — wireless — it continues to bleed subscribers and profits. A few weeks ago the carrier said it was outsourcing its network operations to Ericsson (s ericy), but it also said savings from that deal would be reinvested back into the network.

Sprint’s original problems with customer service stemming from poor integration after the Nextel merger may have been solved (it argues they have), but it is now threatened by defections to the AT&T  (s T) network for the iPhone (s aapl). Since June, it has had a cool device in the Palm Pre, but it’s not looking like that’s cool enough to keep subscribers on board. Going forward, as Sprint continues investing in the network without actually having to run it, it looks like the carrier’s focus is on the prepaid business. Maybe it can become the ultimate hybrid of a mobile virtual network operator.

20 Responses to “So Far the Palm Pre Isn't Helping Sprint”

  1. Korion Morris

    Why doesn’t anyone take into account how long the Pre has been out at that point (less than a month), and the fact that even at release there was a shortage (long delays to get the phone). The Pre has certainly helped Sprint, but it will not be its saving grace. Improvements in customer service, network coverage and innovations are what will keep sprint alive for the foreseeable future.

  2. Love Sprint and love my new Pre. The WebOS is really a nicely designed platform and hopefully the flood of apps will come soon. $99 for the Everything plan really does include everything–voice, data, texting, picturemail, web, navigation. Beats getting ripped off by AT&T and the iPhone ecosystem. Plus it actually makes and keeps a phone signal. What a concept!

  3. Sprint kicked butt around 9 years ago. Early into web-enabled phones (for the US, anyway), and they had one of the best phone UIs out there, imposed across multiple models from different manufacturers. Then the wheels fell off.

    Qualcomm screwed them on CDMA technology, and their internal testing failed to detect that base stations had limited range. They sold too many accounts for their weak infrastructure, and people started getting service outages all over the place. Service handled it poorly, pissing off customers even more (I canceled an account with a positive balance and it took me 4 months to get my money back).

    The Nextel purchase was a stupid distraction. And Sprint just never recovered. Sad to see a leader fall down like this.

  4. Mitchele Vigil

    A truly horridly run little company. During a time of severe client retention problems, they decide to spend (yes I know it is a stock swap) on the outright acquisition of a low margin business? Pre-paid profitability margins are razor thin, and S has in no manner presented the level of competence required of a company fighting for survival let alone the ability to fight for increased market share. Then again, what do you expect from a company that completed one of the worst mergers in the history of M & A?

  5. Steve Raznick

    I worked for the outfit, a real joke. The insulated fiefdoms, the low level of competency, unable managers at every level especially Retail. Whomever the V.P in charge of this aspect is an utter failure. Have you been to a sprint store? Utter failure in training, again competency. Product mix? The Pre has many severe issues, too small keyboard, freezing screens, and poor battery life. (Given the core level competency of Palm, everyone expected more from this product) At least they have stopped those inane Hesse commercial spots!

  6. I am in the iPhone cult, and have been AT&T for 10+ before it… however, earlier today I bought my young daughter her first phone – just needed text messaging on a cool phone @ a fair price. Sprint was a pleasure to deal with & had better hardware – to the point I selected to put her on her own sprint account vs. go thru the headache of adding another phone to my lame family plan on the deathstar.

    Let’s face it, they all suck & its all about the device from here out. The mobile operators are destined to become the same dumb pipe providers as they spawned out of on the landline side. They’re not innovative, mired in process, and rely on legacy as their only competitive advantage.

  7. I have to admit I almost considered getting the Pre, but when Verizon’s CEO announced they’d have it in about six months I held off to see what they would offer. Verizon has NYC pretty well covered. I wonder if that has affected others decision?

  8. I recently left Sprint for T-Mobile and I’ve been thrilled with the service/value. I was with Sprint since 1997, but its retentions department made me some truly lame offers. I really wanted to support the company, because I love underdogs, but lately Sprint has been more loser than underdog. With Om raving about the Curve 8900 and T-Mobile offering a sweet summer special, I made the switch.

  9. I like Sprint a lot. There customer service has been excellent lately! I hope they make it. I think what really hurts them is that their phones do not work internationally. It is the biggest reason I get when I ask people why they don’t go Sprint. Their data connection is Excellent!! by the way.

  10. Jesse Kopelman

    Sprint picked the wrong network to keep. The should have sold off the legacy stuff and started over with WiMAX. The value of their legacy assets and shrinking customer base is decreasing every day.

      • Jesse Kopelman

        But Sprint used to be somewhat of an exception. They were right to dump the jumbled Sprint Spectrum venture and focus on digital and the congruent spectrum footprint they got from the PCS auction. They were the first carrier to realize that leasing towers made better business sense than owning and were able to spin off that division into a profitable business. They were right to dump the landline business and got out at a relatively good time. Not doing the due diligence on Nextel and overpaying by 3X is what killed them. Of course, it was fate catching up to them, as if not for regulatory interference they would have merged with Worldcom/MCI 10 years ago and gone belly up once all of Worldcom’s malfeasance were exposed.

      • Jesse Kopelman

        Right they own it, but they don’t have day to day control. Meanwhile, the bulk of their expenditures go to maintaining their dying legacy network rather than helping build out a new WiMAX network.