Sprint Nextel is expected to reward long-suffering investors with its first quarterly subscriber growth in more than three years, but the celebration may be short-lived.
Gains in the 2010 fourth quarter would be a milestone for Chief Executive Dan Hesse in his bid to turn around the No. 3 U.S. mobile service, but analysts say customers losses will likely resume in the current quarter.
On average, Sprint is expected to post fourth-quarter net additions of almost 17,000 customers who subscribe to long-term contracts, according to eight analysts contacted by Reuters. Estimates ranged from a loss of 50,000 to a gain of 55,000.
Sprint, due to report fourth-quarter results February 10, gained ground last year as the first U.S. operator to sell phones that operated on fourth-generation (4G) high-speed data services.
But competition will heat up as Verizon Wireless has upgraded its network to a new technology and AT&T Inc and T-Mobile USA are both marketing their services as 4G, said Piper Jaffray analyst Christopher Larsen. He expects Sprint to lose 100,000 contract customers in the current quarter.
It's a little premature to celebrate that they're out of the woods. They were the only 4G game in town last year and they made some good gains out of that, Larsen said. This year they're going to lose that advantage and will have to compete on other things like price.
Another issue is that the first quarter always tends to be weaker after consumers splurge during the holiday shopping season.
What's more, Sprint will face more competition as its biggest rival, Verizon Wireless, is set to offer the Apple Inc iPhone in February.
Sprint still has work to do, said Mizuho analyst Michael Nelson. I see them going back negative (contract subscriber losses) in the first quarter until the fourth quarter, and not turning positive for a full year until 2012.
The last time Sprint posted a year of postpaid net customer growth was 2006. It had one growth quarter in 2007.
But Nelson expects Sprint to show improvements in each quarter of 2011. He sees it posting a full-year loss of 100,000 contract customers, compared with losses of 900,000 in 2010 and 3.5 million in 2009.
The company is spending heavily to attract new customers, but it is expected to post a fourth-quarter loss of 30 cents per share, compared with a loss of 34 cents a year earlier, according to analysts polled by Thomson Reuters I/B/E/S.
Revenue is expected to increase almost 4 percent to $8.17 billion, the analysts said.
But despite its progress, Sprint's fourth-quarter customer growth will look modest in comparison to its bigger rivals, even though they are expected to show slower growth than in the fourth quarter of 2009.
On average, Verizon Wireless, a venture of Verizon Communications and Vodafone Group Plc, is expected to report the addition of more than 646,000 contract customers in the fourth quarter, according to the estimates of the eight analysts contacted by Reuters.
These estimates factor in expectations that some consumers held off signing new phone contracts while they waited for Verizon Wireless to announce an iPhone deal. Verizon is due to report quarterly results on January 25.
AT&T is seen adding almost 504,000 contract customers in the fourth quarter, according to the analysts. They expect AT&T to trail Verizon after record third-quarter growth, the first full period for iPhone 4.
AT&T is to report its results on Jan 27.
(Reporting by Sinead Carew; editing by John Wallace)