AP
Sprint Nextel Profits Fall Sharply
Wednesday August 8, 8:14 am ET
By David Twiddy, AP Business Writer
Sprint Nextel Reports Profits Down Sharply on Higher Costs

KANSAS CITY, Mo. (AP) -- Wireless provider Sprint Nextel Corp. said Wednesday its second-quarter profits dropped sharply on slightly higher revenue and higher costs tied to its planned rollout of a WiMax network.

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.

The company, which has struggled to keep up with its wireless rivals AT&T and Verizon Wireless, said it increased its subscriber base during the quarter by 400,000 to 54 million customers, including a net of 16,000 post-paid customers -- the first positive numbers in that profitable category in almost a year. Wholesale channels contributed 155,000 new subscribers while affiliates generated 33,000 new subscribers.

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 and is seen as an answer to similar plans offered by such companies as Leap Wireless International Inc.

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 its churn, or the measure of customers entering and leaving the service, decreased slightly to a little more than 2 percent, compared with 2.1 percent in the year-ago period. Average revenue per post-paid user, the group that pays monthly bills and tends to buy more lucrative services, declined more than 2 percent to $60, while average revenue from Internet use and other data services rose 40 percent.

"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.

The company said it spent $51 million during the quarter 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 team up with Clearwire Corp. to develop the network in a bid to cut costs.

Overall expenses during the quarter rose 8 percent to $8.5 billion, including higher costs to maintain its Sprint network and higher marketing costs.

Wireless revenues rose 3.5 percent from $8.5 billion to $8.8 billion while revenue from its more traditional wireline business, which includes Internet telephone service, 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.