Sprint Posts Huge Loss, Scraps DividendsBy Reuters - | Posted 2008-02-28 Email Print
Sprint Nextel's losses are mounting.
NEW YORK (Reuters) - Sprint Nextel Corp posted a $29.45 billion quarterly loss on Thursday due to a huge impairment charge and forecast that subscriber losses will deepen in the first quarter, pushing its shares down 10 percent.
The No. 3 U.S. mobile service also announced that it would stop paying dividends for the "foreseeable future" and Chief Executive Dan Hesse said it would take many quarters to accomplish a turnaround and rebuild Sprint's wireless brand.
Sprint, which has been losing ground to rivals amid network and customer service problems, forecast that it would lose 1.2 million customers who pay monthly bills in the first quarter, compared with 683,000 such losses in the fourth quarter.
While Sprint had warned last month of continued downward pressure, Stanford Group analyst Michael Nelson said the subscriber outlook was "considerably worse than even most of the bearish estimates out there."
Nelson, who had estimated that Sprint would lose 400,000 valuable post-paid subscribers who pay monthly bills in the first quarter, said investors were also disappointed that the company did not lay out a plan to turn around the business.
"People expected that things were going to be really bad but were hoping they were going to have a game plan of how they're going to fix it," he said.
Instead, Sprint said it was assessing a reorganization of its business model, and associated sales, distribution and marketing plans. It also said it borrowed $2.5 billion from a revolving credit facility.
"It takes hard work and time to regain a reputation," Hesse, who replaced Gary Forsee as CEO in December, told analysts on a conference call. "To be frank, the issues we face are more difficult than what I expected to find."
Sprint also announced an unlimited calling plan that will be offered beginning on Friday that will cost $99.99 a month, following similar moves by larger rivals AT&T Inc and Verizon Wireless, a venture of Verizon Communications and Vodafone. Analysts have said that these plans could herald a new price war in the industry.
Sprint's fourth-quarter loss of $10.36 a share compared with earnings of 9 cents a share a year ago, or a net profit of $261 million. Revenue fell 6 percent to $9.8 billion, which compared to the average Wall Street forecast of $9.91 billion.
The company posted earnings excluding items such as a $29.7 billion write-off of goodwill value from Sprint's Nextel Communications purchase of 21 cents per share, which was better than the 18 cents per share forecast by analysts, according to Reuters Estimates.
It forecast first-quarter operating income before depreciation and amortization of $1.8 billion to $1.9 billion.
Post-paid average revenue per user was $58 per month in the fourth quarter, and the company expects that to fall to a little over $56 a month in the first quarter.
Sprint has lost more than 65 percent of its market value since August 2005, when it bought Nextel.
Its shares fell to $8.00 in early trade after closing at $8.95 on the New York Stock Exchange on Wednesday.
(Reporting by Sinead Carew, editing by Mark Porter)
© Reuters 2008 All rights reserved
IT Solutions Builder TOP IT RESOURCES TO MOVE YOUR BUSINESS FORWARD
Which topic are you interested in?
What is your company size?
What is your job title?
What is your job function?
Searching our resource database to find your matches...