In its quarterly earnings report last night, Sprint posted a massive net loss. But this morning, the company's stock is rallying. At the moment, shares of Sprint are up more than 3 percent. What gives?
The company explained its greater-than-expected losses by way of a drop in subscribers — Sprint shed over 2 million customers in the last quarter, even as it was trying to bring over users from its now-defunct Nextel service. It also cited the end of Nextel as a source of higher costs, which dragged down profits even further.
Nextel, of course, is the service famous for its walkie talkie-like functionality. Sprint paid $36 billion for the company in 2005, but the merger didn't pay off like it was supposed to. That's because that push-to-talk function operated on an old, 2G data network known as iDEN. While other carriers moved on to 3G and 4G, Sprint had to sink money into competing with them on those networks while still maintaining the iDEN services. Though an increasingly rare breed, Nextel customers have been described as "rabidly loyal" to the service.
Now, however, by decommissioning Nextel's cell towers and other operations last month, Sprint is free to concentrate all of its efforts on upgrading its own branded services. In the last quarter alone, Sprint added 6,500 new cell towers. Since 2011, it's transitioned 4 million Nextel customers onto the Sprint platform.
A recently closed merger with Clearwire now means that, at least on paper, Sprint has about as much spectrum as AT&T and Verizon combined. That means a ton of open network capacity and growth potential, though some parts of the radio spectrum are more valuable than others.
This news comes on the heels of a major corporate takeover of Sprint itself by the Japanese-owned Softbank Corp. While it might look on paper as though Softbank is taking over a flailing enterprise, ditching the Nextel deadweight and adding spectrum puts Sprint in a much stronger position moving forward. And the markets seem to agree.