Sprint Nextel (S) Q2: Still Data King, But Growth Slows

Sprint Nextel is still beating its bigger rivals in a crucial metric: How much money customers spend  on data services such as text messaging, wireless Web access and entertainment. In Sprint’s Q2 earnings report, the company said its customers spent an average of $9.75 per month on data services, or about 16% of their overall bills. This is crucial both to Sprint, whose voice-call revenue is slipping, and a host of companies looking to sell mobile entertainment and data services, like NY’s Flycell and Thumbplay.

Verizon Wireless customers, meanwhile, spent $9.57 per month. AT&T subs spent $8.77, but that number will surely increase as iPhone owner’s data plans get factored in. Meanwhile sequential growth is slowing at Sprint: average data revenue increased just 5.4% from Q1. The previous two quarters showed sequential growth of 5.7% (1Q07 vs. 4Q06) and 12.9% (4Q06 vs. 3Q06).

There’s some hope for Sprint, the No. 3 U.S. wireless carrier. For instance, it is moving its Nextel customers to new “PowerSource” phones that use Sprint’s faster, “3G” data network — the hope is that the faster networks will make data services more attractive. Sprint customers spent about $12.75 per month last quarter on data service, versus Nextel customers who spent much less and brought the company average down. Of the 41.6 million “postpaid” Sprint Nextel customers — those who pay monthly bill, not prepaid — 25.3 million are “Sprint” customers, 15.5 million are “Nextel” customers and 850,000 are “PowerSource” customers that use both networks.

Overall, Sprint operating income of $569 million on $10.2 billion of revenue during the second quarter are down 34% and up 2% respectively from a year ago; the income drop stems expenses connected to the company’s WiMAX operations. Release