PREVIEW-Boost, Pre give hope for otherwise weak Sprint
* Analysts expect Sprint to lose 1.1 mln postpaid users
* Analysts see Sprint adding 180,000 prepaid users
* Shares more than double in first quarter
By Sinead Carew
NEW YORK, May 1 (Reuters) - Sprint Nextel Corp (S.N) is expected to report first-quarter growth for its Boost prepaid unit but its traditional business is still seen suffering from mass customer defections due to the recession and a lingering reputation for poor customer service.
After several quarters of losing prepaid customers, who pay for calls in advance and do not commit to contracts, Boost's first-quarter launch of a $50-per-month unlimited service plan is seen to have helped Sprint add prepaid customers as cost conscious phone users are keener than ever on cheap deals.
"I think that will be an increasingly important part of the strategy," said UBS analyst John Hodulik referring to Boost.
Analysts expect net growth of about 185,000 Boost prepaid customers who pay for calls in advance, according to the average estimate of seven analysts polled by Reuters.
Estimates for prepaid range from a loss of 150,000 customers to a gain of 600,000 customers but everybody expects the new plan to at least help Sprint do better in the first quarter than its fourth-quarter prepaid loss of 314,000.
The plan is also seen helping the company compete with rivals such as Leap Wireless International Inc (LEAP.O) and MetroPCS Communications Inc PCS.N in coming quarters.
"Boost is the wild card. We've heard of places where Boost is doing so well it's having trouble stocking phones," said Chandan Sarkar, a research analyst for Auriga USA. "But let's not lose sight of the fact that Boost alone cannot save them."
Sprint also needs to fix its traditional postpaid business of monthly bill-paying customers who commit to use the company's service for as long as two years.
It has been losing out badly in this business to bigger rivals Verizon Wireless, owned by Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L), and AT&T Inc (T.N).
On average Sprint, the No. 3 U.S. mobile service, is seen reporting a loss of about 1.1 million postpaid users, according to eight analysts contacted by Reuters.
Hodulik said it is harder than ever for Sprint to reduce customer defections because growth is slowing in the overall industry. While Sprint has worked to improve customer service, it takes time to shake of a bad reputation in this area.
On top of all that, Sprint's postpaid customer base is also particularly vulnerable to the weak economy as its Nextel service is popular among blue-collar workers in industries like construction, which has been hit hard in the recession.
"They're still seeing churn from the Nextel base due to higher unemployment," said Hodulik.
Atlantic Equities analyst Chris Watts noted that investors have already put their money on bets that Boost will help show improvements in the quarter, as Sprint shares have more than doubled since January. This makes it vulnerable to a sell-off on the day of earnings if results are worse than expected .
Along with expectations for growth in prepaid, Sprint shares have also been helped in recent months by its exclusive agreement to sell Palm Inc's PALM.O high-profile Pre phone.
The agreement was announced in January but the Pre will not help first-quarter earnings as it has yet to hit store shelves.
Analysts are hoping that the phone goes on sale before June 9, when Apple Inc (AAPL.O) is expected to announce a new version of its popular and much imitated iPhone.
"It would be advantageous if they were to get that product out in advance of Apple so they're not operating in iPhone's shadow," said Watts.
But several analysts cautioned that Sprint might not be ready to announce a launch date for the phone when it reports results in the morning of Monday May 4.
Analysts, on average, expect Sprint to narrow its quarterly loss by about 22 percent to 14 cents per share on cost cuts even as revenue is seen falling almost 11 percent to $8.3 billion, according to Reuters Estimates.
Sprint shares rose 31 cents, or 7.1 percent, to close at $4.67 on the New York Stock Exchange on Friday. (Reporting by Sinead Carew; Editing by Richard Chang)
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