Sprint Nextel, the third largest mobile phone provider in the United States, reported a net loss of 683,000 post-paid subscribers today. This loss is far greater than those predicted by analysts, which ranged between 350,000 and 500,000 subscribers. The company also reported net losses of 202,000 prepaid subscribers. Sprint’s subscriber base was 53.8 million at the end of 2007, including 40.8 million post-paid and 4.1 million prepaid customers.
In reaction to the loss of subscribers, Sprint said it would cut 4,000 jobs. This news sent the company’s stock into a tailspin as shares dropped to their lowest level in more than five years.
“They’re trying to keep ahead of a business … that seems to be springing new leaks faster than they can plug them,” said Sanford C. Bernstein analyst Craig Moffett.
Moffett thinks the subscriber losses were caused by a slowdown in the U.S. economy and Sprint’s own competitive problems within the industry.
Sprint plans to close 125 stores and eliminate over 4,000 sales outlets within other retailers. The company has around 20,000 distribution points, including 1,400 of its own retail stores. Some analysts think now is a bad time to scale back retail presence.
“While that should save expenses, it really puts the company at risk of even slower growth,” said Michael Nelson, analyst at Stanford Group. He said the job cuts could help the company in a period of slower growth, provided the layoffs don’t further hurt its customer service operations.
“What the company really suffers from is an extremely poor marketing message,” Nelson said. “That’s something that can potentially be turned around in a relatively short period of time.”