Sprint Nextel 2Q profits drop sharply By DAVID TWIDDY, AP Business Writer

Sprint Nextel 2Q profits drop sharply By DAVID TWIDDY, AP Business Writer
1 hour, 13 minutes ago



KANSAS CITY, Mo. - Wireless provider Sprint Nextel Corp. on Wednesday said second-quarter profits dropped sharply on takeover costs and expenses tied to its planned rollout of a WiMax network.

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The Reston, Va.-based company, with operational headquarters in Overland Park, Kan., said it earned $19 million, or 1 cent per share, during the three months ending June 30, compared with $370 million, or 10 cents per share, during the same period a year ago.

Not counting one-time amortization, the company said it earned 25 cents per share, beating the 22 cents per share prediction of analysts surveyed by Thomson Financial.

Revenue during the quarter rose about 2 percent from $10 billion to $10.16 billion, missing Wall Street's estimate of $10.2 billion.

Sprint Nextel shares were up 34 cents to $20.56 in early trading Wednesday.

The company, which has struggled to keep up with rivals AT&T and Verizon Wireless, said it increased its subscriber base during the quarter by 400,000 to 54 million customers. Wholesale channels contributed 155,000 new subscribers while affiliates generated 33,000 new subscribers.

During the same quarter, AT&T added 1.5 million customers while Verizon Wireless added 1.6 million customers , but lost 300,000 through the bankruptcy of Amp'd Mobile.

Sprint Nextel said about 100,000 people signed up for the trial of its Boost Mobile Unlimited plan, which provides unlimited flat-rate local calling.

Chief Financial Officer Paul Saleh warned during a conference call with analysts that Sprint Nextel would likely see a loss of customers in the third quarter as more of them are jettisoned for not paying their bills and other reasons.

"The competitive environment remains quite strong so we will see some challenges," Saleh said. "But we expect the resumption of growth in subscribers in the fourth quarter."

Sprint Nextel said its churn, the number of new and departing customers, decreased slightly to a little more than 2 percent, compared with 2.1 percent in the year-ago period. Average revenue per postpaid user, who pay their bill at the end of the month and tend to buy more lucrative services, declined more than 2 percent to $60. Average revenue from Internet use and other data services rose 40 percent.

Company officials said the better churn numbers reflect improvement in the number of Nextel press-to-talk customers leaving the service, which has been plagued with signal problems since Sprint acquired the company in August 2005.

"In the second quarter, Sprint began to realize benefits from our increased funding of business operations," Gary Forsee, the company's chairman and chief executive, said in a release. "We reported a double-digit gain in subscriber acquisitions in our business channels. We met our goal of reducing churn to 2 percent, and network performance continued to improve."

Forsee also said 850,000 customers are now using a hybrid phone that works on both the Sprint and Nextel networks.

The company said it spent $51 million developing its WiMax network, a mobile broadband network that provides Internet speeds comparable to DSL and cable modems. It is similar to the Wi-Fi technology used in airports and coffee shops, but WiMax can provide coverage to entire cities.

Last month, Sprint Nextel, which plans to begin rolling out the system in Chicago, Washington, D.C., and Baltimore by the end of the year, said it would partner with Clearwire Corp. to cut network development costs.

Overall expenses during the quarter rose 8 percent to $8.5 billion, including higher network maintenance and marketing costs. Costs from the buyout increased 44 percent, from $113 million a year ago, to $163 million.

Wireless revenues rose 3.5 percent from $8.5 billion to $8.8 billion while revenue from more traditional wireline business remained level at $1.6 billion.

The company reiterated its guidance of between $41 billion and $42 billion in revenue and operating income before taxes and depreciation of between $11 billion and $11.5 billion. Analysts are expecting revenue of $41 billion and earnings of 87 cents per share.