It looked, for a moment there, like Apple was riding to the rescue at Sprint. Yesterday, the telecommunications company reported a smaller loss than expected in the first quarter. It sold 1.5m iPhones in its second quarter of offering the device, and some 660,000 of those went to new customers. The stock spiked 7 per cent in early trading. A slightly harder look reveals that growth remains dull at Sprint – which, combined with greyish first-quarter results from AT&Tand Verizon, paint a dreary picture of the US telecoms industry. Sprint’s namesake wireless brand did add 263,000 postpaid customers in the first quarter. But that is an expansion of less than 1 per cent. And if you add in Sprint’s rotting Nextel brand, postpaid subscribers fell by 192,000.
Verizon and AT&T did a bit better, adding 500,000 and a bit under 200,000 respectively. But again, these are gains of less than 1 per cent, and probably came mostly at the expense of Sprint and T-Mobile. The bright spot for Sprint is that average revenue per user, which rose nearly $4 in the first quarter, to about $60, is much better than at AT&T or Verizon. That helped margins, but they are still well below where they were a year ago, pre-iPhone.
The hard fact is that the US wireless industry is not very profitable for the two biggest carriers, and downright painful for the third. Cash return on tangible assets at Verizon and AT&T is around 7.5 per cent. At Sprint, which lacks scale and is investing in both the iPhone and a new network, it is 1 per cent. These are not impressive numbers for companies with big holdings of an increasingly scarce asset, wireless spectrum.