Though Sprint Nextel S posted a bigger drop in wireless postpaid customers than we’d expected, there was a lot to like in the first-quarter results. Sprint lost a little momentum in the fight to win new postpaid customers, as a number of factors pressured it during the quarter, notably the iPhone launch at Verizon Wireless VZ VOD . A price increase Sprint put in place during the quarter also may have pushed some new customers away, but the move didn’t hinder improvement in customer loyalty—postpaid customer churn hit a record low, which is particularly impressive given that the first quarter has been seasonally the weakest in recent years. In total, Sprint shed 114,000 postpaid customers during the quarter. Importantly, the core Sprint brand continued to gain customers. Sprint also continued to do very well in the prepaid business, adding 846,000 customers.
The biggest positive during the quarter was a nice jump in average revenue per user. Postpaid ARPU topped $56 per month for the first time in nearly two years, up 2.5% versus a year ago. The aforementioned price increase, enacted at the end of January, should push ARPU higher throughout 2011. Wireless service revenue increased 3.7% year over year, as growth continues to accelerate.
Sprint made solid progress meeting the biggest challenge currently in front of it: improving profitability.
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