Sprint Nextel reported a loss of $847 million on revenues of $8.31 billion. It also announced its 15-year deal to build out a 4G network with LightSquared.
Sprint Nextel reported a
wider loss in the second quarter as consumers abandoned the carrier in favor of
competitors who carry Apple's iPhone.
Sprint reported a net loss
of $847 million, or 28 cents a share, for its fiscal second quarter ended June
30, compared with a loss of $760 million, or 25 cents a share, over the same
period last year. Wall Street analysts had forecast a narrower loss, of 12
cents a share.
As the third-largest
wireless company in the United States, Sprint has struggled against Verizon
Wireless and AT&T. Sprint Nextel lost 101,000 contract customers during the
second quarter, most likely because they moved to rival carriers to get the
iPhone.
The availability of the
iPhone at Verizon and AT&T hurt Sprint, as did the aggressive pricing for
older iPhone models at AT&T, Joseph Euteneuer, Sprint's CFO, said on the
earnings call with analysts.
Even though it wasn't
profitable, it added 1.1 million net new customers during the second quarter,
with 573,000 retail customers and 519,000 customers from its wholesale
partners. Even with the iPhone defectors, the contract customer turnover rate
was only 1.75 percent, which was Sprint's best-ever result.
Sprint saw revenues grow 3.6
percent to $8.31 billion and average user revenue rose to $57 from $55 a year
ago. Analysts had forecast revenues of $8.3 billion.
If AT&T's proposed
merger with Deutsche Telekom's T-Mobile USA is approved by regulators, Sprint
will be the weakest nationwide wireless provider. Sprint has repeatedly
expressed its objections to the deal since it was announced in March and
reiterated them again on the analyst call.
"Sprint has been the
most visible leader of those that oppose the proposed takeover, but opposition
is beginning to come from all corners," Dan Hesse, Sprint's CEO, told
analysts on the call.
Sprint plans to spend $5
billion to upgrade its network over the next three to five years to compete
with Verizon and AT&T's various 4G offerings. Hesse also announced it had
signed a 15-year spectrum hosting and networking services agreement with
startup LightSquared.
Under the deal, Sprint and
LightSquared would share network expansion costs and equipment while building
out an alternative high-speed nationwide wireless network. The deal would help
LightSquared build out its national network for less while giving Sprint a new
revenue stream.
"In addition to
improving our cash flow, it provides additional options and flexibility in how
we meet our customers' future capacity needs," said Steve Elfman,
president of network operations and wholesale for Sprint.
During an 11-year period,
LightSquared will pay Sprint $9 billion in cash and $4.5 billion worth of
credits. LightSquared will offer its wireless capacity wholesale to other
companies. Sprint will be able to use the credits to acquire wireless capacity
from LightSquared.
The Federal Aviation
Administration released a report July 27 that found LightSquare's proposed
Long-Term Evolution 4G network could interfere with GPS signals that enable
safe military, commercial and civil flight navigation, especially around
airports. As a result, it was "almost inconceivable" that the Federal
Communication Commission would approve the LightSquared plan at this point
where lives were at stake, said Craig Moffett, an analyst at Sanford C.
Bernstein.
"We will not turn on
the network until this issue is resolved," Hesse said on the call. The
deal is contingent upon LightSquared resolving GPS interference issues,
Euteneuer said, and Sprint can terminate the deal if conditions are not met by
the end of 2011.
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