Sprint Gains on IPhone 4S, Network Improvements

Sprint reported a less drastic third-quarter loss than last year and an uptick in new customers, signaling the carrier may be poised for a turnaround driven by the iPhone 4S and network upgrades.

Apple iPhone 4S

The company posted a third-quarter loss of more than $300 million, significantly narrower than its $900 million-plus loss of one year ago. Sprint also made strides in its quest to win back customers, adding 1.3 million new subscribers last quarter.

Sprint's report marks the Overland Park, Kan.-based carrier's sixteenth straight quarterly downturn, but these most recent numbers are different since they represent the company's last quarter without the iPhone.

"The number one reason why customers churn off our network is 'no iPhone,' and we believe the reason why most don't try Sprint is 'no iPhone,'" Sprint CEO Dan Hesse said in a conference call to discuss the quarterly report.

Sprint is the last of the top-three carriers to sell the iPhone, an acquisition that may help it restrain customers from defecting to Verizon and AT&T. The iPhone has already been able to attract new customers, according to Hesse. He said the past two weeks of iPhone 4S sales will break the record for percentage of buyers who are new customers, a title previously held by the HTC Evo.

But Sprint's strategy also comes with a high price tag. The carrier will pay Apple $20 billion over the next four years for rights to the device.

Sprint isn't resting all its hopes on the iPhone. The carrier plans to roll out its 4G LTE network next year and follow up with an upgrade to faster LTE-Advanced technology early in 2013, furthering efforts to pull even with Verizon and AT&T, which have already rolled out LTE.

But its planned projects don't come cheap. Sprint reports it needs to raise as much as $7 billion to pay for handsets and a new network upgrade. The company already has nearly $20 billion in outstanding debt due within the next five years, and it may be taking steps to draw down on its credit line to stay liquid until profits from iPhone sales and network upgrades start to roll in, likely around 2015.

Sprint's investors voiced concerns over how much cash the carrier laid out to lure more customers away from Verizon and AT&T, and Sprint shares fell as much as 10 percent after it announced its third-quarter loss.

For Sprint, risk is high and finances are tight as it heads into the fourth quarter. The carrier has very little wiggle room in its strategy, and is riding on strong iPhone sales to help it get back in the black.