Sunday, January 7, 2007

Sprint Nextel Trims Expectations and Jobs

Sprint Nextel updated its financial outlook and detailed its plans to improve operational performance, including job cuts. The company will reduce its overall full-time headcount by approximately 5,000 from the 2006 year-end level of 64,600.

Based on preliminary data, Sprint Nextel said expects to report full-year 2006 consolidated operating revenues of approximately $41.0 billion, while Adjusted Operating Income Before Depreciation and Amortization (adjusted OIBDA) continues to be projected in a range of $12.6 billion to $12.9 billion. Total capital expenditures are estimated to be $7.0 billion to $7.3 billion.

For 2007, the company now expects consolidated operating revenues of $41 billion to $42 billion. In 2007, revenue growth from a larger subscriber base is expected to be offset by lower average revenue per subscriber and lower wireline revenues. Adjusted OIBDA of $11 billion to $11.5 billion, inclusive of approximately $300 million of start-up operating costs associated with WiMAX 4G broadband services.

During the fourth quarter, Sprint Nextel added 742,000 total net subscribers and ended the period with a base of 53.1 million. The fourth quarter net additions include 876,000 from wholesale and affiliates, and 171,000 new Boost customers, which were offset by a decline of 306,000 post-paid subscribers. Post-paid performance in the quarter reflects solid gains in CDMA subscribers, offset by a decline in the iDEN base.

In a statement, Gary D. Forsee, the company's chairman and chief executive officer, said: "Our plans for the coming year build on the efforts we initiated in the second half of 2006. Sprint Nextel has substantial assets, including unparalleled spectrum ownership and network capabilities and a significant head start on providing converged services and fourth-generation wireless services. In the near term, a lower margin revenue mix, investment of an additional $1.1 billion in our business operations and start-up costs associated with the build-out of our fourth generation WiMAX wireless network will pressure profitability. We will continue to adjust our cost structure, which will include a workforce reduction, as we meet the changing demands of the business. Over the course of the year we expect to resume growth of the post-paid customer base and stabilize these revenues, improve post-paid churn to below two percent and achieve increasing merger synergies. We expect these actions to support a return to mid-single digit revenue growth and mid-to-high teen adjusted OIBDA growth in 2008, prior to dilutive impacts from the 4G initiative."

Other highlights include:

  • Sprint Nextel added more than 3,400 cell sites in 2006.

  • In the coming year, Sprint Nextel expects to further increase network coverage and capacity with the addition of approximately 4,800 new cell sites and to extend mobile broadband technology throughout its CDMA network.

  • The company expects to complete the conversion of its entire customer base to a unified billing platform in 2007 from the multiple legacy platforms in place today.

  • A new call center dedicated to serving Boost customers will be opened and the number of business and consumer centers will be expanded during the year.

  • The handset portfolio has been re-energized with 10 new models, including ultra-thin CDMA phones from Motorola and Samsung. The company has made initial customer deliveries of combined CDMA-iDEN devices and plans to launch national marketing in mid-January under the name PowerSource.

  • The company intends to use the Boost Mobile brand and leverage its lower cost structure in a trial of a new local unlimited calling plan that will operate on the CDMA network in selected markets.

  • The company expects handset subsidies to increase in 2007 as compared to subsidies in 2006.

  • The company's VoIP offering with its cable partners now covers 30 million cable households. Sprint Nextel currently serves nearly 1.5 million cable telephony subscribers, and this base is expected to double by the end of 2007.

  • Wireless service offered through the joint venture with the cable partners was commercially launched in four markets in November. More than 40 additional markets.

  • 2007 capital expenditures are expected to be approximately $8.5 billion, consisting of $7.1 billion for core wireless networks and spectrum re-banding efforts, $600 million for wireline and up to $800 million for the company's WiMAX initiative.