Sprint's Imploding

On February 28, Sprint Nextel Corp. (NYSE: S) reported disappointing results for fourth quarter and full-year 2007, with a huge net loss in Q4 due to a write-down of its Nextel acquisition in 2005 for $36 billion. Earlier coverage is available here and here in which I had looked at Sprint’s troubles including the launch of iPhone.

Its Q4 operating revenue was $9.8 billion, down 6% y-o-y and 2% y-o-y mainly due to losses in the wireless segment. Net loss was $29.5 billion or $10.36 diluted loss per share compared to net income of $261 million or $0.09 diluted EPS in Q4 2006, and $64 million or $0.02 EPS in Q3 2007. Full year revenue was $40.1 billion, down 2%.

Segment-wise, wireless revenues were $8.5 billion in Q4 (down 6% y-o-y and 2% sequentially) and $34.7 billion in full year 2007 (down 1% y-o-y driven by lower equipment revenue). Wireline revenues were $1.6 billion in Q4 (up modestly q-o-q and down 1% y-o-y) and $6.5 billion in 2007 (down 1.5%).

At the end of 2007, Sprint had 53.8 million total wireless subscribers with a decline of 108,000 in Q4. Q4 post-paid churn was 2.3%, the same as Q3 2007 and Q4 2006. Its churn is the highest in the industry, and its rivals AT&T (T), Verizon (VZ), and T-Mobile seem to be fighting hard to get its defectors.

And in Q1 2008, Sprint expects to lose $1.2 million post-paid customers. To keep its customers interested, it is offering a $99.99 plan with unlimited calls, text messages, Web access and G.P.S. navigation.

Here’s an interesting Wall Street Journal blog post speculating about a Verizon takeover of Sprint. But as it says, when it can have its customers easily with its downfall, why bother acquiring?

Daniel R. Hesse, formerly with AT&T took over as the CEO two months ago. Last month, he announced that Sprint would close 125 retail locations, and lay off 4000 employees. Recently, the company’s corporate headquarters moved back to Kansas for better efficiency. Its market cap is around $19 billion, and its stock is currently trading around $6.83. It had hit a 52-week low of $6.89 earlier this week on March 3. I still don’t see how this would recover anytime soon, in fact, it looks like this situation will still deteriorate further.

click to enlarge

Comments

[StoneyBaloney]

There's absolutely nothing new in this article, other than the most current stock price. The rest has all been reported over and over and over by others. So what's the purpose of the article??

[S fan andcustomer]

Everyone wants to bash Sprint, because it's an easy thing for a 'journalist' to do. There are many positive things to consider about Sprint, and I think that is what most readers look for as they read another Sprint article. I encourage journalists to seek out the silver lining, instead of regurgitating the same stories over and over.

[stuck intime]

Looks like she had an article obligation and putting an alarming title on Q4 results is the best she could come up with. Didn't even follow her own comments about this website:
Unquestionably, Seeking Alpha offers value to its audience by bringing together a diverse range of opinions from the financial community.

[your dad]

Nice copy and paste job. If you think this is lame read the rest of her blog.

[Tradewolf]

Although her article is somewhat factual, it is dated old news, and she does not make any attempt to discuss the improvements that are coming in S by new mgt. In addition although the VZ rumor is mentioned which is OLD she does not talk about the Tmobile or AMX rumors which are NEW and have some credibility. Imploding, no. In decline at the moment yes. They still are a very profitable wireless company sitting on over 50 million subs and a lot of assets. They did not have to throw in the kitchen sink and write down 29B of the 36B Nextel aquisistion. They did so and it saved a lot of capital on top of the over 2B cash they have. It did piss off the shareholders understandably. S is a very attractive takeover candidate at the moment and both GOOG and AMX neither of which have Anti trust concerns here with a S buyout.

[NextelAccessories]

Agree, enough of the Sprint Bashing. Changes are coming at Sprint, but it can't happen overnight.

[User 161880]

There's 1 positive and that's the fact that Daniel Hesse is now the CEO... Also Sprint's $99.99 plan is very attractive. I mean Sprint's $99.99 plan has unlimited minutes, unlimited web & text. It's going to take soemtime but sprint will once again compete. I just got back from a Verizon store & the same thing Sprint is offering @ $99.99 Verizon is offering for $40-$50 more. Going to check on AT&T next....

[rmgreenwald]

Putting aside the rehash of Sprint data above: perhaps if the leadership at Sprint would concentrate on improving the quality of their wireless service (they are consistently lagging Verizon) they might actually gain some market share and improve financially.

Simplistic, but IMHO it's the bottom line.

[bob321]

I saw a speach by Obama the other night and he spoke of how the current administration has been giving industries like Telecom significant breaks. He stated he would eliminate this relationship..... Wow, look how well Telecom stocks have done under the current administration, what book is he reading?????