Sprint reports ‘highest-ever’ revenue of $7.2 billion for Q2 2013, loses $1.6 billion on Nextel shutdown
Sprint has just announced its second quarter 2013 financial results, and while it's pay as you go plans are paying off in terms of income, shutdowns and charges caused a huge loss.
Context & Ripple Effects
Sprint entered Q2 after a quarter in which one million subscribers left and a first-quarter loss that accompanied a sharp drop in iPhone sales. Its losses had already widened in Q2 2012, despite 1.5 million iPhone sales.
The permanent July shutdown of Nextel closes the network tied to Sprint's 2005 acquisition, while prepaid plans supplied enough growth to lift quarterly revenue. The result separates improving top-line intake from the cost of retiring a legacy network.
First-order effects
- Sprint records a $1.6 billion quarterly loss from Nextel shutdown charges even as Q2 revenue reaches $7.2 billion.
- Nextel customers and operations are no longer supported after Sprint permanently shut down the network, ending a long-running integration burden.
Second-order effects
- Sprint's financial performance becomes harder to judge from net income alone: revenue growth and prepaid-plan income must be weighed against the one-time cost of closing Nextel.
- The shutdown removes Nextel as a separate network obligation, concentrating Sprint's operating and product efforts on its remaining network and subscriber base.
Third-order effects
- The Nextel exit illustrates how a troubled carrier acquisition can continue shaping earnings years after the deal, making integration risk a lasting constraint on telecom capital allocation.
- If carriers pursue consolidation, investors and regulators are likely to scrutinize not only purchase prices but also the cost and complexity of retiring overlapping networks.
The trend: US carrier economics are increasingly shaped by the trade-off between subscriber-revenue growth and the costly cleanup of legacy network assets.