Sprint Reports Huge Loss; Warns Of More Difficulties - WashBiz Blog

Sprint Reports Huge Loss; Warns Of More Difficulties
By Zachary A. Goldfarb

The depth of the challenge facing new Sprint Nextel chief executive Dan Hesse was laid bare today when the wireless carrier announced a $29.5 billion loss for the fourth quarter of 2007 and warned of ongoing troubles.

Sprint eliminated its dividend and wrote down the full value of Nextel Communications on its balance sheet. Sprint merged with Nextel in 2005 in a $70 billion deal, but the marriage has been a difficult one. Sprint also announced it had borrowed $2.5 billion to sustain business operations.

Sprint said 1.2 million wireless subscribers are expected to drop their service by the end of March. In the whole of 2007, that many subscribers abandoned Sprint. Meanwhile, chief rivals Verizon Wireless and AT&T gained subscribers.

The loss of $29.5 billion ($10.36 per share) compared to a profit of $261 million (9 cents per share) in the fourth quarter 2006. The loss for all of 2007 was $29.6 billion ($10.31) compared to $995 million (34 cents) in 2006. Overall revenues for 2007 decline slightly from 2006.

In early trading, Sprint shares sank 20 percent, according to Bloomberg. The stock had already lost a third of its value this year. The loss was the fifth-largest among S&P 500 companies since 1990, according to Bloomberg.

"The fourth quarter financial results reflect the challenges facing our wireless business," Hesse said in a statement.

Hesse said the those challenges were "more difficult than what I had expected to encounter," and said the series of changes he is implementing to shore up the firm "will take time to produce improved operating performance."
"Our near-term subscriber and financial results will continue to be pressured," he said.

Since taking Sprint's helm in December, Hesse has cut 4,000 jobs, let three top executives go, eliminated 125 Sprint retail shops and consolidated the company's headquarters, moving senior executives from Reston to Overland Park, Kansas.

"Internally, we have rolled out a unified company culture focused on accountability and on providing a superior customer experience. We plan to share some of our initiatives for improving the customer experience and operations next quarter. Strategic assessments and changes may take longer to complete," Hesse said.

A big remaining decision is how the company will adjust its plans to deploy a nationwide, high-speed wireless network known as WiMax. Sprint has been in talks with outside firms, including Intel, about spinning off its WiMax division into a joint venture and receiving a cash infusion. An original plan to spend $5 billion on the network was panned by analysts and investors.

Sprint also announced a $99.99 "Simply Everything" plan, including unlimited voice, data, text, Web surfing, mobile television, music, GPS navigation, and direct and group connect. Rivals had also recently launched unlimited mobile calling plans at the same price.

Sprint's plan offers customers more features at the same price. But many expected the firm to introduce a plan at a much lower price, stirring competition.