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Sprint posts big loss, but adds subscribers, bumps up LTE

Unless Deutsche Telekom AG's (ETR:DTE) T-Mobile USA pulls off a whopper of an earnings surprise later this month, Q4 2012 was a remarkably gloomy quarter for the U.S. cellphone industry.

I. Passing Grades for Sprint, Verizon -- a Mostly Bad Quarter for AT&T

Sprint Nextel Corp. (S) followed competitors AT&T Inc. (T) and Verizon Wireless -- the joint venture between Verizon Communications Inc. (VZ) and Vodafone Group Plc. (LON:VOD) -- in reporting its earnings for the fourth calendar quarter of last year.

The results, compared and contrasted to AT&T and Verizon can be seen below:

 Q4 2011 carriers
Sprint had a quite a decent quarter compared to its competitors.  While they all lost money, it was Sprint who posted the biggest percent gain in subscribers, the carrier's biggest growth since 2005.  

Overall, roughly 720,000 of the new customers (40%) were iPhone purchasers.  This offered somewhat of a vindication of its high-risk strategy of taking on deep debt obligations to get the iPhone from Apple, Inc. (AAPL).  While Sprint came in second to Verizon in revenue gains, it posted a far smaller net loss.

As a side note, Sprint reported 1.8 million iPhones sold -- a number that surpassed analyst expectations, but matched (precisely in sig. figs.) my estimate from last month. Coupled with the sales successes at Verizon and AT&T, this emphasizes just how victorious the iPhone 4S was in the U.S. in Q4 -- a surge that helped the U.S. smartphone maker pass Samsung Electronic, Comp., Ltd. (KS:005930) in total 2011 smartphone sales.

Sprint iPhone
Sprint's iPhone is selling well and defying the skeptics. [Image Source: Sprint]

However, there were some extenuating circumstances that contributed to its competitors' misfortune and may be making Sprint outlook look slightly rosier than it really was.

First, Verizon took a large pension charge and another one-time charge, which in turn plunged it into a relatively large lost.  Likewise, AT&T's larger loss comes from the $4B USD it wrote off when the T-Mobile deal collapsed.  The loss covers some of the billions in cash and spectrum that AT&T owes T-Mobile under the negotiated terms of the failed deal.  While it's unwise to say that AT&T and Verizon will be immune to future large losses, it's fair to say that their balance sheet looked worse than it really was.

And overall, it's important to keep in mind that all the carriers posted large losses in the quarter.

II. Sprint Charges Ahead With LTE

In related news Sprint showed that its wisely taking the necessary steps to build up an LTE (4G) network to stay competitive with AT&T and Verizon.  Sprint initially had backed the WiMAX standard, a rival 4G specification that now looks to be going the way of the dinosaur.

Sprint just announced two new cities for the program -- Baltimore, Mary. and Kansas City, Kans./Miss.  The network had previously announced that Dallas, Houston, and San Antonio, Texas along with Atlanta, Georgia would be the first cities to receive LTE.  Now it looks like a six-city rollout is planned for "mid-2012".

Despite the loss of a potential $15B USD payday from LightSquared -- who now is facing ethics investigations over campaign contributions to President Obama -- Sprint is still hoping to scrape together enough cash to hoist a decent LTE network mid-year.

It announced a trio of devices that would be on the network -- the popular Samsung Galaxy Nexus (also on Verizon) and the new LG Viper LTE from LG Electronics Inc. (KS:066570).
Galaxy Nexus
The Galaxy Nexus [Image Source: Samsung]

The Viper is a new handset 4.0-inch all-touch Android 4.0 Ice Cream Sandwich handset that features a 1.2 GHz dual-core processor, but otherwise ho-hum specs.

LG Viper
The LG Viper LTE [Image Source: DroidMatters]

Sprint will also be offering a tri-capable hotspot from Sierra Wireless, Inc. (SWIR) that's capable of handling 3G, "4G" (Sprint's name for WiMAX), and "4G LTE".

Company Senior Vice President Bob Azzi cheers the coming offerings, stating, "Sprint is investing in its CDMA network and delivering on our commitment to ensure customers experience superior wireless voice and data service at an unbeatable value."

III. T-Mobile's German Owner Plans to Beef Up Carrier for Survival Bid

With an estimated $3B USD in (almost) free cash in pocket from AT&T, and additional $1B USD worth of spectrum and roaming privileges also in hand, Deutsche Telekom -- the parent of T-Mobile USA -- is starting to think that its U.S. property may be capable of independent survival, after all.

The carrier is reportedly is planning a major (in the billions) sale of debt (bonds) to fund T-Mobile's growth and network expansion.

Currently T-Mobile is in distant fourth, although the exact numbers won't be known until 2/20/2012, when T-Mobile USA gives its earnings guidance.  The carrier previously had an estimated 33.8m subscribers -- roughly 40 percent less than Sprint, and only (appr.) a third of the subscribers of Verizon/AT&T, each.

T-Mobile is luring some customers in offering free "4G" phones, but the offer is deceptive as you're getting an outdated HSPA+ device.  T-Mobile thus far is the only major U.S. carrier not to have announced plans for (or deployed) LTE -- true "4G".

Sources: Sprint [1], [2], AT&T, Verizon

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"Out-dated" HSPDA
By aebiv on 2/8/2012 5:12:56 PM , Rating: 2
I get a nice 14Mbps download here on my "4G" with T-Mobile. Honestly, that's fast enough for me, and I get great battery life.

I have absolutely NO desire for an LTE phone, as using LTE does nothing but suck the battery dry instantly.

Really, HSPDA is enough, I'd much rather them put up more HSPDA/3G locations than invest in LTE in a race to "who can hit the data cap the fastest."

RE: "Out-dated" HSPDA
By mevans336 on 2/10/2012 1:31:33 AM , Rating: 2
I'll put my LTE experience against your HSDPA experience any day of the week. That's what matters on a handset after a few Mbps, not raw throughput. I had an HSDPA handset, now I have an LTE handset. It's night and day.

To be fair, standard 3G versus HSDPA was also a night and day feeling. So I can see how you would be led to believe HSDPA is awesome, even though it's really not.

RE: "Out-dated" HSPDA
By mevans336 on 2/10/2012 2:21:06 AM , Rating: 2
Bionic connected via WiFi on a 30/30 Fiber Line:

Bionic connected via LTE (3 of 4 bars):

Laptop connected via same WiFi:

For a direct comparison:

RE: "Out-dated" HSPDA
By name99 on 2/10/2012 2:34:03 PM , Rating: 2
Look, it's NOT ABOUT reaching higher peak speeds. It's about better spectral efficiency, better use of the available frequency bands so that MULTIPLE users all get decent speeds.

You might enjoy your 14Mbps max speed today --- but when there are a hundred people in your cell, ALL trying to connect to the internet, you're going to see 140kbps --- and that's assuming everyone is near the cell center, of course most people are near the cell edge and see a lot worse. Most of this fancy technology --- MIMO, QAM-64, OFDM etc --- isn't so that a single person can hit 100Mbps; it's so that
(a) there IS a pie of 100Mbps that can be shared by multiple users and
(b) the experience at the cell edge is a lot better than it is today.

Yes, LTE chipsets drain the battery today. You think it will stay that way forever? Are you completely ignorant of the entire history of the solid state electronics industry?

"This week I got an iPhone. This weekend I got four chargers so I can keep it charged everywhere I go and a land line so I can actually make phone calls." -- Facebook CEO Mark Zuckerberg

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