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Gerard Hallaren, CFA
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  • Expect postpaid CDMA to drive a positive surprise at Sprint Nextel 0 comments
    Apr 6, 2011 10:51 PM | about stocks: S, S, T, VZ, USM, TDS, T, TMUS
    Sprint is likely to have another strong CDMA/4G quarter adding 270 thousand new customers with an increasing ARPU.   
     
    Sprint has a little more than 3.0 MM CDMA subscribers coming up for renewal in the quarter. We expect that 42% or not quite 1.3 MM of them will end service. While this is a 2.3% improvement from Q4/2010, we see it within the generally improving trend of the last year. 
     
    Since the beginning of 2010, Sprint CDMA business has had gross additions of 1.4 MM or more subscribers.  Our specific estimate for Q1 is 1.55 MM with 180K of those coming from iDEN customers transferring to CDMA. This estimate balances the smaller subscriber base compared to a year ago with the popularity of Simply Everything, several hot handsets like the EVO and Epic and unlimited 4G service in the package. 
     
    Sprint CDMA/4G Business Dynamics
    M
    J
    S
    D
    M
     
     
    2010
     
     
     
    2011
     
     
     
     
     
     
     
    A
    REVENUE ($ in millions)
    $4,436
    $4,419
    $4,451
    $4,533
    $4,602
    A
    Ending Subs (thousands)
    26,581
    26,717
    26,993
    27,446
    27,716
    A
    % Churn
    2.03%
    1.78%
    1.84%
    1.70%
    1.75%
    E
    ARPU
    $55.52
    $55.42
    $55.37
    $55.90
    $55.62
     
     
     
     
     
     
     
    E
    Net Adds
    (131)
    136
    276
    453
    270
    E
    Lost Customers
    1,620
    1,420
    1,479
    1,379
    1,280
    E
    Gross Additions
    1,489
    1,556
    1,755
    1,832
    1,550
    E
    Transferred from iDEN
    50
    50
    50
    110
    180
    E
    % of Gross adds from iDEN
    3.4%
    3.2%
    2.8%
    6.0%
    11.61%
    Sources: Sprint (NYSE:A) and JRPG (NYSE:E)
     
    In the fourth quarter of 2010, Sprint raised price by $10 for 4G customers. There was no great outcry about the price hike and Sprint had a great quarter. To us, this is the best testimony of Sprint’s improving position. 
     
    Clearwire’s contribution
     
    Demand for 4G services continues to display very strong market momentum. At the same time, our expectations assume some softening in demand compared to Q4/2010.  The key to this analysis comes from understanding Clearwire’s wholesale business. 

     
    This table shows the last 12 months of Clearwire’s wholesale customer base, net addition and our estimates for Q1. 
     
    Clearwire
    M
    J
    S
    D
    M
    In thousands except %
    2010
     
     
     
    2011 E
     
     
     
     
     
     
    Ending Wholesale Customers
    157
    752
    1,829
    3,246
    4,396
    Net Wholesale Additions
    111
    595
    1,077
    1,417
    1,150
     
     
     
     
     
     
    Est. Sprint Portion
    90%
    85%
    85%
    85%
    80%
    Est.Sprint 4G Customers Added
    100
    506
    915
    1,204
    920
    Source: Clearwire and JRPG
     
     
     
     
     
     
    Note that we expect Sprint’s Q1 4G consumption to be down 24% from Q4/2010. This may prove pessimistic. Indeed, we have endeavored to use mid-case or lower estimates.


    Disclosure: I am long S, CLWR.
    Stocks: S, S, T, VZ, USM, TDS, T, TMUS
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