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Sprint’s defense of market share comes at a price

May 5, 2015, 12:26 PM UTC
Sprint added mobile subscribers but still needs to slash its expenses.
Scott Olson—Getty Images

Sprint Nextel’s (S) strategy of slashing prices to keep defend its number three position among U.S. cellphone networks appears to be paying off–albeit at a price.

The company said Tuesday its revenue fell 6.7% and its net loss widened to $224 million (from $151 million a year earlier) in the three months to March, as its scrap T-Mobile (TMUS), even though it reported its best figures for new users in nearly three years.

The two have been engaged in a full-on price war since a mooted merger between them fell apart last year. The impact of that was clear as average revenue per user slid 3.3% from the previous quarter to $56.72. A year ago, Sprint was getting $62.98 a month from its average customer.

Operating income was $318 million, down by a quarter from a year earlier.

Sprint said it had gained a net 211,000 in ‘postpaid’ customers in the quarter, after 30,000 in the previous three months and 231,000 in the same quarter a year ago. Postpaid customers are seen as the most valuable to carriers because of the stability of the revenue they bring. At the same time, the company’s ‘churn rate’ fell sharply to 1.84% from 2.30%

The company also attracted more prepaid users, posting a net gain of 546,000 after 410,000 in the previous quarter. As a result, it had 57.14 million connections at the end of March, keeping it behind only Verizon and AT&T, and just ahead of T-Mobile’s 56.8 million.

How long it will keep that position is still open. T-Mobile is still growing faster, having added 1.8 million new customers net in the first quarter–the eighth quarter in a row that it had posted a net gain of over 1 million connections.