NEW YORK—Sprint Nextel Corp. reported a wider loss in the second quarter but saw its lowest turnover rate ever in contract customers as the wireless carrier also confirmed a 15-year agreement with privately held LightSquared Inc. to build and operate a high-speed wireless network.
Sprint is racing to get its business back in shape as it faces a widening gap between it and its larger rivals in Verizon and AT&T Inc. The carrier still isn't profitable but added 1.1 million net new customers, largely driven by its prepaid and wholesale businesses.
The Overland Park, Kan., company is poised to be a distant last-place nationwide wireless provider if AT&T's plan to acquire T-Mobile USA from Deutsche Telekom AG is approved. Sprint has expressed its objections to the deal.
Sprint's turnaround attempt also comes as it battles new entrants in the speedier 4G arena. Once the sole carrier with a next-generation wireless service, Sprint faces stiff competition from Verizon, which recently launched its own super-fast network, as well as AT&T and T-Mobile, which have both embraced a 4G marketing message.
The company on Thursday said it reached a spectrum hosting and networking services agreement with LightSquared, a start-up attempting to build an alternative high-speed wireless network.
Shares, up 22% in the year-to-date through Wednesday's close, fell 8% to $4.75 in premarket trading.
LightSquared, which is owned by Philip Falcone's Harbinger Capital Partners LLC hedge fund, is attempting to build a wireless network using a 4G technology called Long-Term Evolution, similar to Verizon Wireless' newly built 4G network. Unlike traditional carriers, the start-up plans to run it as a wholesale model, allowing other companies to buy and resell wireless service to consumers.
LightSquared will pay Sprint roughly $9 billion in cash over an 11-year period to host L-Band spectrum and provide network services, among other agreements. The agreement is expected to lower network capital and operating expenses for LightSquared by more than $13 billion over the next eight years in comparison with the cost of a stand-alone network build.
It also provides Sprint the opportunity to buy up to 50% of LightSquared's expected L-Band 4G capacity, giving Sprint the option to obtain "cost-competitive" access to 4G capacity by offsetting Sprint's purchases of 4G capacity from LightSquared.
"This spectrum hosting agreement with LightSquared allows Sprint to more efficiently use its Network Vision platform," said Steve Elfman, president of Network Operations and Wholesale for Sprint. "In addition to improving our cash flow, it provides additional options and flexibility in how we meet our customers' future capacity needs."
Sprint reported a first-quarter loss of $847 million, or 28 cents a share, compared with a year-earlier loss of $760 million, or 25 cents a share. Revenue rose 3.6% to $8.31 billion.
Analysts polled by Thomson Reuters forecast a loss of 12 cents a share and revenue of $8.3 billion.
Sprint lost 101,000 contract subscribers, largely through its Nextel service. It added 573,000 retail customers and 519,000 customers from its wholesale partners.
Sprint's average revenue per user rose to $57 from $55 a year ago, the largest year-over year growth in over seven years. The contract customer turnover rate was 1.75%, Sprint's best-ever result.
Sprint also backed its forecast for growth in both total and contract customers for the year.
