Sprint's Turnaround Remains A Dream (S, T, VZ, VOD, CLWR)

The third largest wireless phone company in the US, Sprint Nextel Corp. (NYSE:S) continues to add customers, but they must not be paying their bills. The company reported a third-quarter EPS loss of -$0.30 this morning, much worse than the -$0.17 EPS loss in the same period a year ago and below estimates of an EPS loss of -$0.28. Revenue rose to $8.15 billion, up from $8.04 billion last year and better than estimates of $8.03 billion.

Competitors AT&T (NYSE:T) and Verizon Wireless, a joint venture of Verizon Communications Inc. (NYSE:VZ) and Vodafone plc (NASDAQ:VOD), reported positive earnings last week. AT&T posted EPS of $0.55, while Verizon Wireless put up EPS of $0.31.

Sprint added 644,000 total wireless customers in the third quarter. That’s the biggest number in four years, but postpaid customers, who sign contracts for a period of time, fell by 107,000. The company added 471,000 prepaid customers, who add minutes when they need to. Postpaid customers, who provide a steady revenue stream, are more valuable than prepaids.

In the third quarter of 2009, Sprint lost 801,000 postpaid customers, so this year’s loss is a big improvement. Last year the company also added 666,000 prepaid customers.

In its quarterly report, Verizon Wireless said it added 584,000 customers. AT&T said it added 2.6 million net subscribers in the quarter. Verizon Wireless claims 93.2 million subscribers to AT&T’s 92.7 million. Sprint is a distant third, with 48.8 million.

Sprint has launched its high-speed 4G cellular network through its majority-owned Clearwire Corp. (NASDAQ:CLWR). But the rollout of the 4G network cost the company more than it expected in handset upgrades for customers. The new network is now available in 56 cities, but Verizon Wireless is launching its own high-speed 4G service in about 40 markets by the end of 2010. AT&T expects to offer its high-speed network by the middle of 2011.

The company’s revenue was higher thanks to the successful rollout of its 4G network. Unfortunately for Sprint, the subsidies the company paid to get new handsets to the 4G subscribers torpedoed profits.  While there are some metrics improving in this never-ending turnaround, it looks and feels like each two steps forward is followed by one step back.  Sprint has long-been considered the most vulnerable to M&A of the wireless carriers, but there is still a question of whether or not any domestic buyer or foreign buyer would want it.

Sprint shares were down about 4% in pre-market trading this morning, but after nearly 30 minutes of trading the stock is now down 6.6% at $4.46 and we have almost hit a full average day’s volume now that 40 million shares have already traded..

Paul Ausick