To Ward Off Holiday Blues, Sprint Will Boost Marketing

CEO Dan Hesse: Ad Outlay Returning to 'Normal Levels'

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SAN FRANCISCO ( -- With weak marketing blamed for many of Sprint's problems, the company today said it would boost its ad spending -- at least to parity with past years -- to try to ward off a disappointing end to what has already been a challenging year.
Dan Hesse
Dan Hesse Credit: Andrew Walker

"Advertising levels are beginning to move back up more toward normal levels," CEO Dan Hesse said in an earnings conference call today, later adding that he expects spending to "be closer to our historical advertising levels at Sprint." According to a Securities & Exchange Commission filing, sales and marketing expenses last quarter dropped 19% from a year ago; the company does not break out its marketing expenses from the bucket of "selling, general and administrative expense."

According to TNS Media Intelligence, Sprint spent $417 million on ads in the first six months of 2008, down from $690.9 million over the same period in 2007. In fourth-quarter 2007 it spent $313.6 million.

Focus on value
Since Mr. Hesse came on board late last year, the company has focused much of its efforts on customer retention and improving customer service. Lately its ads have featured the CEO himself. Mr. Hesse said Sprint will make a case for competitive pricing in its messaging, a value proposition that may get some mileage in these downtrodden times.

"We're beefing up our advertising around the value of 'Simply Everything'; earlier advertising was more around the simplicity of 'Simply Everything,'" he said, referring to the company's all-you-can-eat plan that starts at $99 with a two-year contract.

Last week its prepay unit, Boost Mobile, launched a campaign that emphasized value, marking a shift from its lifestyle positioning.

Mr. Hesse also said to expect to see advertising for the Samsung Rant phone, which Sprint has billed as "the ultimate texting machine." "You'll see advertising around the Rant where you get extremely easy-to-use 3G phone for under $50," Mr. Hesse said.

The country's third-largest wireless operator lost a net 1.3 million wireless customers in the third quarter, slamming its bottom line and continuing a trend that's been going on for the last year, during which the company has lost more customers than it has added.

Sprint posted a net loss of $326 million on $8.8 billion in net operating revenue, compared with a profit of $64 million in the year-ago quarter. Churn, the rate at which it turns over customers, was just under 2.15% in the third quarter compared to 2.0% in the second quarter.

"We have yet to turn the corner," Mr. Hesse said during the conference call.

The iPhone effect
One could make a good guess where many of Sprint's customers went, considering 40% of AT&T's 2.4 million iPhone activations last quarter were new subscribers. The iPhone effect also hit Sprint competitor T-Mobile, which reported earnings earlier this week. Though its numbers were disappointing, T-Mobile managed to net 670,000 new subscribers in the third quarter.

Without a holiday hit on its hands, Sprint could be in trouble during the industry's busiest season of the year. Verizon Wireless yesterday unveiled on its website the highly anticipated Blackberry Storm smart phone, though it didn't say when it would be available. Many expect the touchscreen phone -- arguably the first by Research in Motion aimed at the mass market and, thus, competitive with the iPhone -- to hit stores before Black Friday, the day of Thanksgiving. T-Mobile, which also said a new lineup of phones would be available for the holidays, already has the Google G1 smart phone in its back pocket.

Sprint is staking its future on a WiMax network, which is designed to deliver high-speed wireless service faster than existing mobile networks. The Federal Communications Commission this week gave the green light for Sprint and Clearwire Corp. to combine their wireless broadband businesses, a joint venture that has Google, Intel and other heavy hitters as investors. Verizon Wireless and AT&T have committed to a competing technology known as LTE.

Meanwhile, AT&T yesterday said it bought WiFi service Wayport for $275 million, effectively giving its smart-phone users more access to WiFi.
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