Ugly Q1 for Sprint, as Wireless Subs Flee

Not a good first quarter for Sprint Nextel (S).

The company posted Q1 revenue of $9.3 billion, down 8% from a year earlier, and a little below the Street consensus of $9.4 billion. Adjusted EPS, before special items and amortization, was 4 cents a share, down from 18 cents a year ago and 21 cents in the fourth quarter, but two cents ahead of the Street. The company said it lost 1.09 million wireless subscribers in the quarter.

The outlook sounds grim. The company said in a statement that it expects “downward pressure” on adjusted OIBDA, post-paid gross additions and post-paid average revenue per user over the next few quarters. The company expects customer churn - which hit an alarming 2.45% in the latest quarter - and net subscriber losses to improve marginally in Q2 from Q1.

Sprint said it expects to have sufficient cash on hand to operates the business and repay scheduled debt maturities through the end of 2009. However, the company did say it is exploring de-levering, disposition of non-core assets and other measures to stay in compliance with financial covenants in its credit facilities. Sprint said it “may consider entering into discussions with our lenders to obtain appropriate waivers or amendments” of its credit facilities. “We currently expect to remain in covenant compliance over the next few financial quarters while exploring and pursuing these measures,” the company said.

Sprint said it is assessing its business model and associated sales, distribution and marketing plans and its financial outlook, and expects to provide an update in connection with second quarter results.