Sprint's Defection Rate Spells Trouble

Aug. 4.06 | About: Sprint Corporation (S)

Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

Sprint Net Falls Amid Fight for Users

  • Summary: Sprint-Nextel's (NYSE:S) 2.1% turnover rate came back to haunt it, as it reported second quarter earnings of $370mm ($0.12/share), down 38% from $600mm ($0.40/share) it reported for the same period last year. The lower earnings were despite a 10% increase in revenues, to $10 billion. On a net basis, Sprint added 210,000 high-end customers, but existing customers are increasingly moving to lower price plans. It's competitors Cingular (a joint venture between AT&T (NYSE:T) and BellSouth (BLS)) & Verizon (a joint venture between Verizon Communications (NYSE:VZ) and Vodafone (NASDAQ:VOD)) are both signing up more customers (1.5mm and 1.8mm, respectively) and experiencing lower defection rates (1.7% and 1.1%, respectively).
  • Comment on related stocks/ETFs: Sprint's announced $6b share-buyback plan did not prevent its stock from hitting a new 52 week low of $16.88 yesterday. Legg Mason's Bill Miller has been an aggressive buyer of the stock. Resources: press release, conference call transcript & Bloomberg's write-up of the earnings results.