[ Tuesday ]
Sprint PCS Feels the Burn of Rising Churn
By Scott Moritz
TheStreet.com Senior Writer
02/03/2004 12:37 PM EST
That hiss is the sound of wireless customers leaking out of the Sprint PCS (PCS:NYSE - news - research) balloon.
Big telco parent Sprint (FON:NYSE - news - research) kept investors on hold Tuesday, saying it would wait till tomorrow to discuss its big strategic plans. But word that its wireless business will lose more customers this year left investors wincing.
Shares of Sprint PCS dipped 2.3% after the company posted a drop in average monthly revenue and boosted its projection for subscriber churn. Executives on a conference call said they expected the monthly subscriber-loss rate to increase to 3% from 2.7% as customers increasingly take their phone numbers to other services. PCS slipped 19 cents to $8.05.
The higher defection rate inflames concerns that Sprint will be caught on the wrong side of the wireless industry's revolving-door effect. Wireless number portability rules took effect at the end of November, and since then the divide between wireless service-provider winners and losers has only broadened. Laggards in coverage and service like Cingular, a joint venture between SBC (SBC:NYSE - news - research) and BellSouth (BLS:NYSE - news - research) , and AT&T Wireless (AWE:NYSE - news - research) have been burned by higher churn. Meanwhile, industry leaders Nextel (NXTL:Nasdaq - news - research) and Verizon Wireless have surged ahead.
Given that some companies spend more than $400 to acquire each new subscriber, retaining those customers long enough to cover the initial investment becomes a key challenge.
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