The country's third-largest wireless carrier, Sprint Nextel
Joining the next generation
Sprint is pouring in a lot of cash to roll out its very own 4G LTE network -- unfortunately a lot more than it has been able to generate out of its current operations. And with rivals AT&T
At the same time, Sprint has to deal with the Nextel headache on its hands. In fact, Sprint failed to retain a whopping 192,000 contract customers in the quarter, primarily from its Nextel arm, as it prepares to shut down the latter's outdated network. And you still haven't heard the full story. Out of the $863 million that Sprint lost during the quarter, $543 million was related to the phase-out of Nextel alone.
Thankfully, the company managed to counter some of its losses as it added around 263,000 contract users under its own brand name, while rivals Verizon and AT&T added 501,000 and 187,000 contract customers, respectively, for the same period. But the factor that may make the greatest difference in Sprint's fortunes lies with Apple's ground-breaking product -- the iPhone, naturally.
Apple's "iPain for Sprint"
While the iPhone is known for being a huge burden on wireless carriers, which dole out massive subsidies for the phone to get customers to sign long-term service contracts, it has proved beneficial for Sprint in a number of ways.
While larger rivals such as AT&T and Verizon have seen a huge drop in iPhone activations, Sprint has moved a step ahead, with new activations representing a significant 44% of the 1.5 million iPhones it has sold in the first quarter. This, in turn, drove Sprint's average revenue per user up by $4.03 from the previous year. How good is that? Well, according to the company, it represents the highest year-over-year increase to ever occur in the history of the U.S. wireless industry.
But on the flip side, it's estimated that the company would have to part with a jaw-dropping $15.5 billion in iPhone subsidies over the next four years. But Sprint is hopeful the device will turn it a profit by 2014.
The Foolish bottom line
Let's face it. Sprint has been through five years of losses so far. And as it unloads cash to roll out 4G LTE, phases out some of Nextel's old networks, and continues to subsidize the wildly popular iPhone, the company looks set for a hard time ahead. For now, I'd prefer to watch the company from the sidelines -- and so can you by adding Sprint to your very own free watchlist.
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Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and have recommended creating a bull call spread position in Apple. The Motley Fool has a disclosure policy.
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