Wednesday, February 18, 2009

Sprint Cites Financial Stability in Tough Times

Citing progress in its customer satisfaction program, gains in post paid subscriptions, and enthusiasm for its exclusive launch of the Palm Pre later this year, Sprint Nextel reported consolidated net operating revenues of $8.4 billion and a diluted loss per share of 57 cents. Full-year 2008 revenues were $35.6 billion. The company recorded a non-cash goodwill impairment charge of approximately $1 billion in the quarter, which finalizes the accounting for the goodwill related to the Sprint Nextel merger and other acquisitions.

During the quarter, the company repaid approximately $1 billion in principal of debt and received $213 million in proceeds at the closing of the Clearwire transaction. As of Dec. 31, 2008, the company had $3.7 billion of cash and cash equivalents and $1.4 billion of borrowing capacity available under its revolving bank credit facility, for a total liquidity of $5.1 billion.

"In tough economic times, we're generating substantial cash and reducing costs to ensure we remain financially sound. We already have the cash on hand to be able to meet our debt service requirements at least through the end of 2010," said Dan Hesse, Sprint Nextel CEO. "With this financial stability, we can build on the improvements we've made in customer care, strengthen our brand and maintain continued strong network performance in 2009.

"Independent evaluations report our significant improvement in customer care and network performance. Customers are responding to our messages of value, simplicity and productivity. Simply Everything provides a worry-free postpaid experience, and we are bringing the lessons learned from this success to our new family plans and to the prepaid market with the hassle-free national Boost Monthly Unlimited offer. We also have high expectations for the Palm Pre handset which will be launched later this year," Hesse said.

Some highlights for the quarter:

  • On Nov. 28, 2008, the company closed a transaction with Clearwire, Sprint contributed assets, including its 2.5 gigahertz spectrum and WiMAX-related assets, in exchange for an ownership interest in Clearwire.

  • Consolidated net operating revenues of $8.4 billion for the quarter were 4% lower than in the third quarter, primarily due to a lower contribution from Wireless.

  • Capital expenditures were $548 million in the quarter, as compared to $485 million in the third quarter. The increase reflects higher spending in both Wireless and Wireline segments. Included in the fourth quarter and full-year 2008 capital expenditures is $90 million and $560 million, respectively, in capital expenditures related to the deployment of WiMAX that will not recur in 2009 due to the closing of the Clearwire transaction.

  • Net Debt decreased by approximately $550 million from the end of the third quarter to $17.9 billion at the end of the fourth quarter, consisting of total debt of $21.6 billion, offset by cash and marketable securities of $3.7 billion.

  • The company served 49.3 million customers at the end of 2008, compared to 53.8 million at the end of 2007. The credit quality of the customer base improved every quarter in 2008, and prime customers represent almost 84% of the post-paid base, compared to 79% a year ago.

  • For the quarter, total wireless customers declined by a net 1.3 million, including losses of 1.1 million post-paid customers and 314,000 prepaid users, which was slightly offset by a 146,000 increase in the number of wholesale and affiliate subscribers.

  • At the end of the fourth quarter, the company served 36.7 million post-paid subscribers, 3.6 million prepaid subscribers and 9.0 million wholesale and affiliate subscribers.

  • Subscribers by network platform include 35.5 million on CDMA, 12.4 million on iDEN and 1.4 million Power Source users who utilize both networks.

  • Almost 10% of post-paid customers upgraded their handsets during the fourth quarter, resulting in increased contract renewals.

  • Wireless post-paid churn was 2.16% compared to 2.15% in the third quarter and 2.29% in the year-ago period. The sequential increase in churn is primarily driven by deactivations on business lines as a result of current economic conditions, and the year-over-year decrease is primarily due to the improvement in the credit quality of our customer base, partially offset by the slight increase in voluntary churn.

  • Wireless service revenues for the quarter of $6.6 billion declined 13% year-over-year and 4% sequentially. The year-over-year decline and the sequential decline were due primarily to fewer wireless subscribers. Wholesale, affiliate, and other revenues were down sequentially and as compared to the year-ago period primarily due to a decline in average monthly service revenue per wholesale subscriber.

  • Wireless post-paid ARPU in the quarter was stable sequentially at $56, as growth in data helped offset voice declines. Wireless post-paid ARPU declined by approximately 4% compared to the year-ago period, reflecting continued pressure on iDEN voice monthly access and overage revenues, partially offset by data revenue growth.

  • Data revenues contributed more than $14.50 to overall post-paid ARPU in the fourth quarter, led by growth in CDMA data ARPU. CDMA data ARPU increased about 9% from third quarter, to more than $17.75, now representing almost 31% of total CDMA ARPU. The increase was driven by strong take rates on bundled data services, such as those included with Simply Everything, as well as continued growth in data cards.

  • Prepaid ARPU in the quarter was approximately $30 compared to $28 in the year-ago period and $31 in the third quarter of 2008. The year-over-year increase reflects a growing contribution from CDMA Boost Unlimited subscribers. The sequential decline is due to lower ARPU from traditional prepaid users.

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