- Associated Press - Wednesday, October 26, 2011

NEW YORK (AP) - Sprint Nextel Corp. on Wednesday reported its smallest quarterly loss in four years, as it continued a turnaround and kept getting better at keeping and attracting customers.

Sprint also provided important updates on the iPhone, its financing needs and planned network upgrades, undoing some of the damage caused by an investor day presentation three weeks ago that had investors fuming and sent its stock plunging.

Its stock edged lower Wednesday as investors continued to focus on finances that look precarious for the next two years.

The country’s No. 3 wireless carrier said it added a net 1.3 million subscribers in the July to September period, the best result since 2006. Sprint continued to lose subscribers from its lucrative contract-based plans, but at a relatively low rate: 44,000 in the quarter.

Sprint’s total customer count, 53.4 million, is now back at where it was in 2007, before the exodus of Nextel customers turned into a torrent.

The Overland Park, Kan.-based company has made steady gains in the last year and a half. Unfortunately for the company, most of the new customers are low-paying ones. They buy service from Sprint’s low-cost Virgin Mobile, Boost Mobile or Assurance Wireless brands, or from non-Sprint brands that use the company’s network.

The latest subscriber results don’t include the effect of the iPhone, which Sprint started selling Oct. 14. The phone is expected to further improve the carrier’s ability to keep customers, but at a high price. Apple charges about $600 for a phone that Sprint sells for $200.

Chief Financial Officer Joe Euteneuer said each iPhone will cost the company about $200 more than another smartphone. All the same, the company expects its four-year purchasing agreement with Apple to add $7 billion to $8 billion to its own bottom line.

CEO Dan Hesse compared getting the iPhone to signing a star baseball player to the “Sprint team.”

“He has an expensive contract, but he’s worth every penny,” said Hesse, who often draws on sports analogies.

The problem for Sprint is that the cost of selling the iPhone comes up front, while the benefits, like higher service fees and lower service costs, accrue over time. Sprint doesn’t expect the iPhone to be a moneymaker until 2014.

The added cost of the iPhone comes as Sprint is also starting to revamp its network for higher speeds. That adds up to financing needs of $5 billion to $7 billion in the next few years, Euteneuer said.

Sprint hopes to cover the gap by refinancing $4 billion debt coming due, Hesse said. The remaining $1 billion to $3 billion could be raised in the form of financing from the companies Sprint buying its new network equipment from: Samsung Electronics Co., Alcatel-Lucent and LM Ericsson AB.

Euteneuer said the terms of the deal with Apple are confidential, but said there’s a minimum commitment to buy $15.5 billion in iPhones over four years. That works out to about 25 million phones, a figure in line with a report in The Wall Street Journal early this month that the company had committed to buying 30 million iPhones over four years.

Figures on the effect of the iPhone on Sprint’s finances were missing from the presentation on Oct. 7, contributing to investor consternation. On Wednesday, Euteneuer apologized for not providing more information then.

Story Continues →