Full Transcript of Sprint Nextel’s 3Q05 Conference Call — Q&A (S)

Here’s the entire text of the Q&A from Sprint Nextel’s (ticker: S) Q3 2005 conference call. The prepared remarks are here. We recognize that this transcript may contain inaccuracies - if you find any, please post a comment below and we’ll incorporate your corrections. And please note: this conference call transcript is a Seeking Alpha product, so feel free to link to it but reproduction is not permitted without the explicit permission of Seeking Alpha.

Questions and Answers

Operator

OPERATOR INSTRUCTIONS First question is from Jason Armstrong, with Goldman Sachs. Please go ahead

Jason Armstrong

Great. Thanks. Good morning. A couple of questions. First just a clarification. The $14 billion in OIBDA guidance there, I want it make sure we're all clear to what the base actually is in the first three quarters. I'm calculating about 10.6 billion but just I would love sort of clarification if that's actually the right number. And then second, can you talk about Wireless CapEx specifically as we head into '06, was sort of five billion at the starting point. Does that number move up in 2006 and can you give us a sense as to the essential magnitude?

Gary Forsee

The 10.6 number is the right baseline. If you want to repeat the second question, Jason?

Jason Armstrong

The second question was on Wireless CapEx. Thinking about it sort of trending into 2006 and we have a five billion number that you've thrown out there for '05. I'm wondering can you give us a sense, does that number move up or down in 2006 in any sense of the magnitude?

Len Lauer

Yes. Jason, this is Len. Consistent with Gary's reference that we upped the synergies, that we also have put in an incremental $4 billion in CapEx which is above and beyond the stand-alone plan, stand-alone legacy, Nextel legacy, Sprint. So that will happen over the next three years. So yes, you ought to expect Cap, Wireless CapEx to go up next year.

Jason Armstrong

Any sort of magnitude?

Len Lauer

We're really not setting guidance yet so don't want to give you order of magnitude yet.

Jason Armstrong

Okay. Thanks.

Operator

The next question is from Steven Glick, Credit Suisse First Boston. Your line is open go ahead.

Steven Glick

You talked a little bit about what happened to turn this quarter. It looks like if you do the math that turn picked up probably at both legacy businesses. Just wondering if you can talk a little bit about whether those issues have been addressed and what we could expect it see in the fourth quarter? And secondly, are you seeing any sort of a pickup into the fourth quarter from your rebranding campaign? Usually you'd expect, given the increased marketing dollars, a tick-up on gross. Thanks.

Len Lauer

So two questions, one on turn, one on rebranding. On turn, I think, as we commented, the turn has gone up. It's down year-over-year but it's up slightly sequentially and it's primarily due to involuntary turn coming from our iDEN base of customers. And I think we talked to this before. The correct decision was made, that given the popularity of iDEN services and the best performing, Push-to-Talk, to also increase the exposure of consumer base, and as you do that, you are going to have, a greater portfolio sub-prime customers which means you'll have a little bit higher involuntary turn. So that's what we're seeing in the results. That's the primary reason for it. As I commented on the, it's due to involuntary. On the voluntary side, on CDMA, it's the lowest point we've been in a long time. On the voluntary that's primarily due to fair and Flexible. Now as we go into, also involuntary turn tends to be higher, once you come out of the second quarter. Second quarter is always low for involuntary turn. So we're not setting turn expectations for fourth quarter, right now, but we don't anticipate too much of a change from what you saw from third quarter. I think your second quarter on rebranding, you have to take confidence in the guidance we just gave for fourth quarter. If you're wondering if it's higher gross Ads, we stated, and Paul stated that, guidance is 1.4 million net Ads. With strong sequential growth for both PostPaid and Prepaid. That compares to third quarter performance of slightly under a million. So that's a, over a 40%, 45% increase, and I think you ought to take that as an encouraging sign of the effect of our branding campaign.

Steven Glick

Great. Thanks.

Operator

The next question is from Michael Rollins, Citigroup.

Michael Rollins

A couple of questions on distribution. The first is you've expended distribution for Nextel, for example, in the Radio Shack stores and I assume you're giving some for the Sprint as well. Can you talk about the early progress on whether you're seeing a pick up of the new product sales as they're going into the new stores? And then secondly, as it relates to your broader marketing strategy, do any of the ongoing negotiations or processes with your affiliates effect your ability to market in your key larger cities and nationally, for that matter? Thanks.

Tim Kelly

Michael, it's Tim. I'll take the first part on distribution strategy. We are making good progress with the distribution. I think Len referenced in the script, that now 90% of locations are selling both products and measured by cross product sales, we're seeing good steady pickup week-over-week, cross product sales meaning filling in iDEN handset in a legacy Sprint location or vice versa. We also began the rollout of the iDEN services in Radio Shack about two weeks ago. And while it's a little bit early to get results there because the product is just going in and it will be feathering in over the course of the next couple of weeks, we're very encouraged about what that can do to drive overall gross ad performance in the fourth quarter. We think the Radio Shack demographic marries very well with the iDEN user and obviously it's a big Wireless destination, particularly as we go through the fourth quarter. So things are moving, I think very favorably in that area.

Gary Forsee

Michael, it's Gary. I'll take the second question around impact on the ongoing discussions with affiliates on selling capabilities. Our affiliates, mostly operate in second, third, fourth tier markets so in terms of impact on major campaigns in the “NFL