Earlier this year, T-Mobile (NASDAQ:TMUS) CEO John Legere made a prediction: the Un-Carrier would overtake Sprint (NYSE:S) in total subscribers by year's end. Sprint released earningsMonday night, and Legere's forecast is inching closer to becoming a reality.
Sprint shareholders are losing patience with the company's turnaround, with shares down 22% at the low today. How bad were the results?
T-Mobile is catching up in a big way
Total revenue was $8.5 billion, and Sprint saw an operating loss of $192 million during the third quarter. The company saw a total net loss of $765 million, and Sprint continues to bleed postpaid subscribers, the most valuable customers in the industry.
Specifically, the No. 3 (for now) carrier saw 336,000 retail postpaid subscribers jump ship, along with 20,000 retail prepaid subscriber losses. A small silver lining is that Sprint added 840,000 wholesale connections, enough to grow total connections to just over 55 million. Still, postpaid connections are where it matters, and Sprint fell short in this department.
Meanwhile, T-Mobile just reported its strongest growth in the company's history, adding 2.3 million total customers during the third quarter. Of that total, 1.4 million were branded postpaid additions. That puts T-Mobile's total subscriber base at 52.9 million -- within spitting distance of Sprint.
At this rate, it's entirely possible that T-Mobile will overtake Sprint as the No. 3 domestic carrier next quarter if it can maintain its momentum, and there's no reason to doubt Legere now. T-Mobile's postpaid customer churn continues to trend lower, while Sprint's is heading the opposite direction.
One of these days
New CEO Marcelo Claure acknowledged that the company's pricing plans were too cumbersome and uncompetitive, particularly given the intensifying competition within the industry right now. Claure revamped Sprint's pricing structure just weeks after being named CEO in August.
Sprint is expecting higher costs due to increased upgrade volumes in the current quarter, although the company still expects wireless revenues to be under pressure from mounting postpaid customer losses. Sprint is still expected to meet its 800 MHz and 2.5 GHz LTE deployment targets this year, and 2014 capital expenditures should be nearly $6 billion.
Sprint's purported turnaround has been a decade in the making, yet the company has made little meaningful progress. Former CEO Dan Hesse failed to revitalize the company, and now Claure is taking a shot. Still, one of these days, investors are going to run out of patience.
Evan Niu, CFA has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.