November 7, 2008

Sprint Reports Third Quarter Losses, Customer Defections

Shares of Sprint Nextel slumped on Friday after reports showed the company had lost 1.3 million subscribers during the third quarter.

Chief executive Dan Hesse acknowledged that Sprint faces the tough task of attracting new customers during the holiday season.

"We made good progress on our operational priorities in the third quarter and resolved some key issues," he said. "Still, subscriber losses are too high."

He added that the company would make stabilizing revenue a priority during the following quarter.

During the three-month period, Sprint's losses amounted to $326 million, or 11 cents per share compared to $64 million in earnings, or 2 cents per share, in the same period a year ago.

Sprint Nextel's revenue fell 12 percent to $8.81 billion. Analysts expected $8.85 billion.

Sprint Nextel shares fell 28 cents, or 7.6 percent, to $3.40 in morning trading Friday.

Despite great efforts to correct technical problems, unfocused marketing and difficulties integrating operations, Hesse said the company still suffers from poor perceptions in the market.

Sprint has run into a series of complications since it bought Nextel Communications Inc. in 2005.

Sprint Nextel's wireless business reported a 13 percent decline in revenue to $7.5 billion as its subscriber base fell by 1.3 million. That included 1.1 million valuable "postpaid" customers who have contracts. That was worse than in the second quarter, when Sprint Nextel lost 901,000 subscribers, including 776,000 postpaid customers.

Postpaid churn, or the percentage of customers canceling service each month, was 2.1 percent, up from 2 percent in the previous quarter but below the 2.3 percent rate a year ago.

"Stabilizing revenue will be a focus area of ours going forward," Hesse said.

JP Morgan analyst Mike McCormack wrote on Friday that he would not advise investors to put money into Sprint's stock, which has lost more than 70 percent of its value this year.

Also Friday, Sprint Nextel said it had changed the terms of its credit agreement, reducing the amount it can borrow to $4.5 billion from $6 billion but increasing the allowed debt ratio to 4.25 times earnings before taxes and other adjustments, up from 3.5 under the previous deal.

Sprint Nextel sits behind AT&T and Verizon Wireless in third place with 50.5 million customers. It fell further behind in the third quarter as AT&T and Verizon Wireless added 2 million and 1.5 million subscribers, respectively. Both said most of their new customers defected from other carriers.


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