Sprint - Nextel 2013 Annual Report Download - page 45

Table of Contents
Subscriber Results
Sprint Platform Subscribers
Retail Postpaid — During
2013 , net postpaid subscriber losses were 96,000 as compared to net additions of 1.5 million and 1.3 million in 2012 and
2011 , respectively. The change to net losses in 2013 from net additions in 2012 and 2011 was primarily related to the absence of Nextel platform recaptures in the
second half of 2013 as the shutdown of that network was completed on June 30, 2013. Nextel platform and U. S. Cellular recaptures in 2013 totaled 734,000. In
addition, we had approximately 564,000 net additions of tablet devices and approximately 190,000 net additions of connected devices in 2013, which were all
offset by net losses of approximately 1,584,000 on the Sprint platform. Substantially all Sprint platform net additions in 2012 and approximately
508,000 in 2011
represented postpaid subscribers that deactivated service on the Nextel platform. In addition, churn increased when comparing 2013 to 2012 and postpaid gross
subscriber additions declined when comparing 2013 to 2012. We expect churn results will continue to be negatively impacted by Network Vision, with gradual
improvement beginning in the latter part of 2014. In addition, some wireless carriers have recently undertaken various aggressive marketing efforts to incent
subscribers to switch carriers. As a result, these efforts could have a negative impact on churn which would have a negative effect on EBITDA.
Retail Prepaid — During
2013 , we added 488,000 net prepaid subscribers as compared to adding 2.3 million and 4.3 million in 2012 and 2011,
respectively. Our decline in net additions in 2013 compared to 2012 was primarily due to Assurance Wireless and new recertification regulations as discussed in
more detail below combined with continued competitive pressures in 2012 resulting in promotional offerings that drove increased net additions. Also
contributing to the decline in net additions in 2013 was the absence of Nextel platform recaptures in the second half of 2013 as the shutdown of that network
was completed. Approximately
168,000 prepaid subscriber additions deactivated service on the Nextel platform in 2013 as compared to 620,000 in 2012 and
724,000 in 2011. Our decrease in net prepaid additions in 2012 as compared to 2011 was primarily due to a decline in gross subscriber additions on Assurance
Wireless due to lower response rates and a lower subscriber application approval rate resulting from complexities associated with new federal regulations as well
as an increase in churn primarily related to FCC mandated efforts to remove duplicate Lifeline accounts between carriers.
The federal Lifeline program under which Assurance Wireless operates requires applicants to meet certain eligibility requirements and existing
subscribers must recertify as to those requirements annually. New regulations in 2012, which impact all Lifeline carriers, impose stricter rules on the subscriber
eligibility requirements and recertification. These new regulations also required a one
- time recertification of the entire June 1, 2012 subscriber base by December
31, 2012. Accounts of subscribers who failed to respond by December 31, 2012 were suspended and made subject to our prepaid churn rules as described below
(or 365 days in a limited number of states). However, subscribers could re
- apply prior to being deactivated and also had the ability to receive by - the - minute
service at their own expense. We deactivated the accounts of approximately 1.2 million subscribers in the second quarter 2013 primarily related to the
recertification process.
Prepaid subscribers are generally deactivated between 60 and 150 days from the later of the date of initial activation or replenishment; however, prior
to account deactivation, targeted retention programs can be offered to qualifying subscribers to maintain ongoing service by providing up to an additional 150
days to make a replenishment. Subscribers targeted through these retention offers are not included in the calculation of churn until their retention offer expires
without a replenishment to their account. As a result, end of period prepaid subscribers include subscribers engaged in these retention programs, however, the
number of these subscribers as a percentage of our total prepaid subscriber base has remained consistent over the past four quarters. Assurance Wireless and
Clearwire subscribers are excluded from these targeted retention programs.
Wholesale and Affiliate Subscribers — Wholesale and affiliate subscribers represent customers that are served on our networks through companies
that resell our wireless services to their subscribers, customers residing in affiliate territories and connected devices that utilize our network. Of the
8.2 million
Sprint Platform subscribers included in wholesale and affiliates, approximately
44% represent connected devices. Wholesale and affiliate subscriber net
additions were
31,000 during 2013 as compared to 944,000 and 2.7 million in 2012 and 2011 , respectively, inclusive of net additions of connected devices totaling
908,000, 593,000 , and 217,000 during 2013, 2012 and 2011, respectively. Our decline in net additions in 2013 as compared to 2012, as well as 2012 compared to
2011, was primarily due to targeted efforts in 2013 and 2012 to reduce inactive subscriber accounts by our wholesale MVNO customers as well as net losses
attributable to new Lifeline program recertification regulations as discussed
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