Sprint Nextel Swings to 1st-Quarter Loss
By DAVID TWIDDY
KANSAS CITY, Mo. – Sprint Nextel Corp., the nation’s third-largest wireless carrier, said Wednesday it swung to a first-quarter loss as bigger investments in operations wiped out modest gains in sales and it lost high-quality subscribers.
For the January-March quarter, the Reston, Va.-based company reported losing $211 million, or 7 cents per share, versus a profit available to common shareholders of $417 million, or 14 cents per share, a year ago.
Excluding one-time amortization charges, Sprint Nextel said it earned 18 cents per share, well under the 22 cents per share expected by analysts polled by Thomson Financial.
Revenues for the quarter rose slightly to $10.1 billion from $10.07 billion a year ago. Analysts had expected $10.31 billion in sales.
Gary Forsee, the company’s chief executive and chairman, said the company spent a lot of money during the quarter trying to alleviate technological and signal problems that have driven away customers from its press-to-talk service.
"These increased commitments, along with notably higher device subsidies to drive acquisition and retention, impacted our profitability in the quarter," Forsee said in a release. "However, we are seeing some positive trade-offs in the form of enhanced competitiveness."
Sprint Nextel, which has its operational headquarters in Overland Park, Kan., said it gained a net of 600,000 new wireless subscribers during the quarter, ending at 53.6 million. But it reported losing 220,000 high-quality customers who pay their bills at the end of the month and typically spend more.
It was the third straight quarter of losing postpaid customers, most of them former Nextel Communication Inc. customers who have been frustrated by poor signal quality and other problems since the company was acquired by Sprint in 2005.
Those problems, along with a muddled marketing message and other difficulties in integrating the two companies, has left Sprint Nextel far behind in the race for wireless subscribers. Its two largest competitors, AT&T’s Cingular and Verizon Wireless, have reported first-quarter customer gains of 1.2 million and 1.7 million, respectively, many of them former Sprint Nextel subscribers.
The company also was dealt a significant blow in March when AT&T Inc., Verizon Communications Inc. and Qwest Communications International Inc. won a 10-year government contract worth up to $48 billion.
Overall churn, or the measure of subscribers dropping service, was 2.3 percent, level with the company’s fourth quarter but higher than the 2.1 percent reported during the year-ago quarter.
The company said it gained 275,000 customers from its prepaid Boost Mobile brand, 467,000 through wholesale channels and 46,000 from affiliates. A new service offering unlimited voice minutes through Boost, aimed at competing with Leap Wireless and similar services, had minimal gains, the company added.
Overall revenue from Internet browsing, content downloads and other so-called data services rose 44 percent to $1.2 billion versus a year ago. But the dominance of prepaid subscribers, who tend to pay less for data services, continued to weigh on sales as Sprint Nextel’s average revenue per user dipped to $59, almost 5 percent below the same period a year ago and 2 percent down from the fourth quarter.
The company’s long-distance division reported a 2.1 percent decline in revenue as decreased sales from voice and data services offset a 28 percent gain from Internet-based telephone customers. Sprint Nextel said it added 200,000 voice over Internet protocol customers for a total of more than 1.7 million.
Shares of Sprint Nextel opened up 31 cents at $20.32 Wednesday on the New York Stock Exchange.
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