RSSSprint posts a loss: 'We have yet to turn the corner'
By Scott M. Fulton, III | Published November 7, 2008, 4:19 PM
The gamble Dan Hesse took when taking the helm of Sprint was to restore value to a brand whose public image had taken a serious pounding. He may be gaining headway in terms of public confidence, but it's at a cost.
The strategy of new Sprint CEO Dan Hesse has been to reconstruct the public image of his company, and to be transparent about the difficulties ahead. It's a commendable strategy, but this morning Hesse found himself paying the price for it anyway, explaining a $326 million net loss for the quarter on 12.2% lower revenue, as having partly derived from decisions he himself made.
"Gross [customer] adds declined again but to a lesser degree than what we have seen in recent quarters," Hesse told analysts during Sprint's quarterly conference call this morning (our thanks to Seeking Alpha for the transcript). "We decided to conserve marketing resources during the second and most of the third quarter and we focused the marketing dollars we did spend more on retention versus acquisition then we have done in the past. Our share of voice was at its lowest level ever in the second quarter which impacted gross adds in the third quarter. The net result was a loss in third quarter of $1.1 million post paid subscribers."
So Sprint's strategy in recent quarters has been to shore up its losses by concentrating on retaining its current customer base, by improving call quality and services -- something Hesse says it's managed to accomplish this last quarter, as evidenced by improvements in the company's J. D. Power rankings. But that loss-reduction strategy has apparently come at a cost, which translated this last quarter into a loss -- compared with a minor profit for Sprint's fiscal third quarter last year.
As Hesse told one analyst, "We wanted to focus first and foremost on making sure, this is crucial to long term profitability obviously churn that we were inviting customers to an experience that was a good one and they would stay with us for a long time. We tended to move our marketing spend much more heavily toward retention versus acquisition while we, if you will, got our house in order and improved our customer satisfaction levels, care and retail, improvement the quality of our network, and what have you. As a result, we decreased our share of voice very substantially, actually to its lowest levels ever in Q2 and early Q3 then...the advertising levels are beginning to move back up more toward normal levels."
Because customer complaints have been reduced by 20% over the first quarter, Hesse said, Sprint was able to reduce staffing levels for its call centers, resulting in measurable cost reductions.
But perhaps the company's most significant effort in its customer retention project has been its branded data network offerings: specifically, its 3G Now Network with its Simply Everything data pricing plan, and its Xohm WiMAX efforts in conjunction with New Clearwire. It's the Now Network plan that's paying off now, with average revenue per user (ARPU) actually growing significantly -- among users of smartphones like Sprint's Samsung Instinct, the Simply Everything plan is driving up ARPU by an impressive 140% annually.
"Simply Everything has been focused primarily around migration and retention of customers," Hesse told one analyst. With regard to "churn" -- the trend all companies must fight toward loss of customers, he added, "We've [had] not only the lowest absolute churn levels, but the greatest improvement in churn has been evidenced by those on the most high value segment of the market, those spending $80 a month or more. Earlier, some time ago that was a significant problem... We're trying to bring people into what we call bundled offers. It's not just Simply Everything at $99 but we have a number of plans that go down to $69 a month that provide unlimited data. It's been particularly effective and the big numbers have come from migrating our own base."
What's amazing is that things could have actually been much worse for Sprint this last quarter. Capital expenditures, for example, declined by a stunning 59% over the previous year's Q3, to $485 million. So Sprint's strategy, implemented last year, to retain existing customers, improve its free cash flow, and reduce costs may actually be precisely the strategy it needs to face the current economic storm.
I left Verizon (over priced with few perks) for T-Mobile. I left T-Mobile about a year ago (no complaints except for no service in either of my apartments) for Sprint. So I've been with Sprint for a year and 3 months now and honestly, have no complaints. It's 2008 so coverage is not really an issue anymore, and I find that with Sprint my dollars go further. I have unlimited everything, except talk time at 450 minutes, for $69. That kind of service would be more on all other carriers. For the first time in my young adult life, I actually don't have any qualms regarding my service provider.
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I don't see how this direction will work. Does anyone can remember a similar past example?
my comments at http://www.commentino.com/orim
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"Because customer complaints have been reduced by 20% over the first quarter, Hesse said, Sprint was able to reduce staffing levels for its call centers, resulting in measurable cost reductions."
So what,your down to %80 complaints with less csr's?
An honest public apology to the millions of people that got shafted might begin to fix it.
Start with,"we at Sprint realise how badly we have treated our former customers,we lied,cheated and stole from good hard working people who didn't desevre the unethical treatment we gave them....."
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A public apology is all well and good but if they don't actually 'do' something it's just words. Hess already made that apology in his very 1st commercial as the new CEO. It seems to me he is backing it up and making changes.
Sprint has WAY to many CSRs due to the constant calling & complaining by customers. The fact that they can actually cut back on CSRs is a 'good' thing for a company, albeit bad for those employees who got cut.
I still have my doubts that the company can pull through but i think his strategy of focusing on their current customers is a good direction. If they can't keep their current base, how the heck are they gonna be able to get and keep new customers?
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I for one will have a party when this company goes under.I spent my 2 years of hell with them.Even to get them to cancel my contract after it was up was a yelling,threating match.
in the first 6 months with them i was overbilled $2400.Why,silly thing like they didn't put my phone under contract(even though i signed a contract someone forgot to enter it,charged me for unlimited internet etc.It wasn't so much the mistakes,it was that they refused to fix them and treated me like a lying thief from the moment i contacted support.They lied about me and to me,cost me hundred of hours of my time and never once tried to make an accounting of their error.Sprint's demise will bring joy to millions of former tormentee's
They can keep their high value customers,i geuss paying my bill on 2 phones promtly every month and fufilling my contract wasn't enough.
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Sprints customer service has gotten greatly better. I have to say its better than AT&T who's still trying to charge me $500 for the 2 weeks I was with them. I think their going in the right direction.
Sprints call quality has gotten better too, and their 3G network is getting better. Their are still areas that need more towers but I think all networks are lacking in areas of coverage.
WiMAX I think they should market it toward rural areas more where they don't have internet access. Also I think they should explain it better, because at times it sounds like its their 4G network and at other times it just seems like their trying to branch out as an ISP.
If you would have asked me 6 months to a year ago I would have thought that maybe Sprint would go bankrupt but now I think they have a chance with Dan Hesse as CEO. He seems to know what direction to take the company.
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This is what happens when your customer service is horrible, folks. This is how it can and will tear a company down.
For the opposite look at Qwest, which really pushed a brand image out of improving their CS and some would say arguably did so.
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