(Reuters) - Sprint Corp posted a decline in third-quarter revenue on Wednesday, losing more subscribers than expected following the shutdown of its older network, and warned that customer defections would remain high in coming quarters.
But investors shrugged off the results because they do not expect big improvements at the No. 3 U.S. mobile operator until the second half of 2014 and the company did not change its financial targets for full-year 2013. Shares rose 1.5 percent.
Sprint, which is 80 percent owned by SoftBank Corp, is revamping its network after years of customer losses.
Sprint reported net subscriber losses of 360,000 for the quarter. Six analysts contacted by Reuters expected losses of roughly 313,000, on average.
By comparison, Sprint’s biggest rival, Verizon Wireless added 927,000 subscribers in the quarter, and No. 2 U.S. mobile provider AT&T Inc added 363,000. Smaller rival T-Mobile US Inc is due to report results November 5.
Sprint said it suffered from service problems in the quarter due to its work on the network as well as the expected loss of corporate customers due to the June shutdown of its iDen network, which was used mostly by business customers.
The iDen shutdown will hurt Sprint’s subscriber numbers to a lesser extend in the fourth quarter, according to Chief Executive Dan Hesse. But he told analysts on a conference call that Sprint’s customer defection rate, known as churn, would continue to be at high levels into the middle of 2014, when the company expects to complete much of its network overhaul.
Sprint, whose churn rate was 1.99 percent in the third quarter, is working on raising data speeds and adding capacity from spectrum previously used by the iDen network and from spectrum from Clearwire Corp, which it bought out in July.
Sprint did not give any timetable for when it could return to net customer growth.
Roe Equity Research analyst Kevin Roe said Sprint’s results were mostly in line with his low expectations.
“This is a very challenging transition period for Sprint and so the focus is on 2014,” Roe said.
Investors hope Sprint will compete better after the network upgrade and with financial backing from Japan’s SoftBank, which bought a controlling stake in Sprint for $21.6 billion in July. SoftBank founder Masayoshi Son has been praised by analysts and investors for quickly turning around his company’s Japanese mobile operations.
One hope is that Sprint will eventually massively boost its network and offer customers far more capacity than its bigger rivals at a cheaper price because of its Clearwire deal, which brought vast amounts of wireless airwaves.
Analysts have been especially anxious for Sprint to reveal its plans due to concerns it could spend a lot more than expected on integrating the spectrum.
Sprint said on Wednesday it expects to integrate the Clearwire spectrum into its network in markets with a population of 100 million people by the end of 2014.
It’s an indication we’ll continue to maintain our discipline on capital spending,” Chief Financial Officer Joe Euteneur told Reuters after the earnings conference call, without revealing Sprint’s spending plans for 2014.
CEO Hesse said the company, which is well behind bigger rivals in upgrading its network, was on track to install higher-speed Long Term Evolution technology in markets with 200 million people by the end of 2013.
Hesse also promised to give investors details of “groundbreaking” advances in network and handset technology at an event later on Wednesday at a company research laboratory near San Francisco.
Sprint reported a third-quarter profit of $383 million, compared with a loss of $767 million in the year-ago period, before its SoftBank and Clearwire deals.
The company said the latest quarter was helped by a one-time, non-cash, $1.4 billion gain, net of taxes, related to its previously held investment in Clearwire. It did not report earnings per share because of the SoftBank deal.
Revenue fell to $8.68 billion from $8.76 billion.
Sprint still expects 2013 adjusted earnings before interest, taxes, depreciation and amortization of between $5.1 billion and $5.3 billion, including the dilutive effects of the SoftBank and Clearwire transactions. It also stuck by its target of 2013 capital expenditures of about $8 billion.
Sprint shares were up 10 cents, or 1.5 percent, at $6.78 in late-morning trade on the New York Stock Exchange.
Reporting by Sinead Carew in Kinsale, Ireland; Editing by Jeffrey Benkoe