NEW YORK (AP) — Sprint Nextel Corp. on Thursday said its loss widened in the second quarter as it spent more to attract and keep customers, in the face of competition from AT&T and Verizon.
The extra spending meant that Sprint kept adding subscribers, continuing a fragile turnaround, but investors disliked a decline in operating income and sent the stock down sharply.
Sprint shares fell 64 cents, or 12.4 percent, to $4.52 in premarket trading.
The country’s No. 3 wireless carrier also announced that it will be building and operating the national wireless broadband network for LightSquared, a startup financed by a hedge fund. The deal has been rumored for some time.
LightSquared will pay Sprint $9 billion over 11 years for the network. LightSquared, which has been struggling to come up with the money for a new network, said the deal lowers its own costs by more than $13 billion over eight years.
The deal will help finance Sprint’s own network upgrades. Sprint didn’t say that it would sell devices that use LightSquared’s network for faster downloads, but the deal gives Sprint $4.5 billion in credits for use of LightSquared’s network.
Sprint is already the largest owner of Clearwire Corp., another startup that has built a wireless broadband network, and resells access to its network as “Sprint 4G.” It’s unclear how Thursday’s announcement will affect Sprint’s relationship with Clearwire, which needs additional funding for a continued network buildout.
Clearwire’s network uses an early “fourth-generation” wireless data technology that isn’t compatible with the new industry standard adopted by Verizon Wireless, AT&T or LightSquared, which will make it more difficult to get phones and other devices for the network.
LightSquared said the network should cover 260 million people by 2014, one year ahead of schedule. However, the network uses frequencies close to those used by GPS satellites, and tests show that it would disrupt navigation devices. The Federal Communications Commission has said it will not allow LightSquared to launch its network until the interference problems are resolved
Sprint added a net 1.1 million subscribers in the April to June period. It lost 101,000 subscribers on contract-based plans, which are the most lucrative, since Nextel subscribers continued to hang up on a network that Sprint is phasing out. Contract-based subscribers on the Sprint network grew by 226,000, beating AT&T Inc.’s additions for the same period.
Sprint’s extra spending in the quarter included increasing the subsidies it pays to be able to put hot smartphones, which may cost $500 wholesale, into the hands of customers who pay $200 for them. Sprint’s two larger rivals, AT&T and Verizon Wireless, now both sell the iPhone, which Sprint doesn’t have.
“This was a unique quarter because of the intense competition. We made some conscious decision in controlling the levers to make sure we didn’t get killed in the market,” Chief Financial Officer Joe Euteneuer told analysts on a conference call.
The Overland Park, Kan.-based company’s net loss was $847 million, or 28 cents per share, for the three months ended June 30. That’s bigger than its loss of $760 million, or 25 cents per share, a year ago.
Sprint booked losses of $588 million for investment losses and a $52 million charge for change in Michigan state taxation. A figure comparable to the loss of 13 cents per share expected on average by analysts polled by FactSet was not immediately available.
Revenue rose 4 percent to $8.3 billion from $8.03 billion a year ago. The latest revenue figure matched analysts’ expectations.