Sprint vs. T-Mobile: The Battle for Number 3 May Already Be Over

By Markets Fool.com

WhileT-Mobile continues to win wireless subscribers with its no-contract, no-nonsense "Un-carrier" initiative, rival carrierSprint has struggled to accomplish similar gains.

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That has made for a tight race to be the No. 3 U.S. wireless carrier -- a position on which Sprint has a tenuous hold. Sprint finished its latest quarter with57.14 million connections, while T-Mobile had 56.8 million by the end of its last quarter, reported Mobile World Live. Sprint did gain 1.2 million connections during the quarter, a big improvement over its net loss of 383,000 in same period the previous year.

The problem for Sprint CEO Marcelo Claure and his team is that T-Mobile, led by brash CEO John Legere, added 1.8 million connections for the same period, its eighth consecutive quarter over 1 million.

Unless something changes -- and Sprint has not launched any new initiatives that suggest it will -- then T-Mobile will certainly pass its rival before the end of the next quarter (if it hasn't already).

Legere took to Twitter to trumpet his company's results. Source: Twitter.

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It's not all bad for Sprint
Though it is about to become the fourth-ranked wireless carrier behindVerizon,AT&T, and T-Mobile, Sprint has at least stopped its free fall. Before Claure was named CEO in August 2014, the company was bleeding subscribers and lacked direction. At the time, the carrier was pushing its confusing "Framily" plan.

Claure has set Sprint on a more direct path. The company has positioned itself as a lower-cost carrier and has rolled out bold promotions including its offer to cut bills in half for AT&T and Verizon customers. The brand also has a unique pricing arrangement for iPhone users in which it leases them the latest model at a lower cost than they would pay to buy the device.

Most of these moves are essentially "T-Mobile lite" with less personality and not as much pricing transparency, but it's a better plan than the pre-Claure Sprint that was essentially a full-price carrier that was not as good as Verizon or AT&T. The new CEO does seem to understand the depth of the problem and just how far the company has to go.

"I am proud of the team for successfully executing the first phase of our strategy to stop the decline in customers. We are now one quarter into the second phase, focusing on attracting more quality customers, retaining our customers through a better customer experience and continuously improving the network," said Claure in the earnings release.

However, these gains came at a steep price -- the company's operating revenue declined by 7% year over year in the quarter, "mostly driven by customer shifts to rate plans associated with device financing options," though those losses "were partially offset by higher equipment revenue." The company's net loss also increased to $224 million from $151 million for the same quarter in the previous year.

T-Mobile has much to celebrate
"We've had eight consecutive quarters with more than one million total net customer additions proving that customers want value," said Legere in his company's earning release. "We expect to once again capture all of the industry's postpaid phone growth in Q1 and we've done it while delivering an all-time record low 1.3% churn. #WeWon'tStop."

T-Mobile also posted stronger financial results than Sprint, with total revenue for the first quarter of 2015 growing by 13.1% year over year "due to continued growth in equipment sales revenues and service revenues." The company also cut its loss to $77 million compared with a $151 million loss the previous year.

The battle for No. 3
While Legere has publicly stated his desire to pass Sprint to for the No. 3 spot (and eventually to catch AT&T and Verizon), Sprint is pretending it does not care.

"We are focused on long-term growth by offering customers value, providing a great experience and having a reliable and consistent network," a Sprint spokesman told CNET. "Customers don't care who is three or four, still it is something that the media is going to focus on, but if it going to be written about it seems like it should be done without mixing facts with fiction and projections."

That's a bit like giving the "I was just happy to be nominated" speech after losing an Academy Award, but what else can Sprint say? It's clearly going to relinquish its position.

Still, in the long run being No. 3 doesn't matter. The game is about growth and, at some point, profitability. T-Mobile looks like the healthier of the two companies, but Claure at least appears to have Sprint back on the right track.

The article Sprint vs. T-Mobile: The Battle for Number 3 May Already Be Over originally appeared on Fool.com.

Daniel Kline owns shares of Apple. He considered writing this article with no capital letters in support of the New York Rangers and their battle with Washington in the Stanley Cup playoffs but assumed his editors would not like that. The Motley Fool recommends Apple, Twitter, and Verizon Communications. The Motley Fool owns shares of Apple and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.