Telecommunication service provider Sprint Nextel Corp. (S) reported Wednesday a loss for the second quarter that doubled from last year. Revenues slumped even as the company added wireless customers for the first time since 2007.
However, adjusted loss per share for the quarter came in narrower than analysts' expectations by five cents, while quarterly revenues came in line with estimates.
The company also said it expects positive total net wireless subscriber additions in the second half of 2010, and fewer net postpaid subscriber losses compared to the first half.
During the quarter, Sprint Nextel launched the world's first 4G smartphone, the HTC EVO 4G, that runs on Google's Android 2.1 mobile operating system. The EVO 4G comes with a price tag of $199.99, accompanied with a two-year service agreement, after a $100 mail-in rebate.
In a statement, chief executive officer, Dan Hesse said, "Our intense focus for the past ten quarters on improving the customer experience, strengthening our brands, and generating cash are paying off. With strong cash flow, stable OIBDA and widespread third-party recognition for the improvements we're making in the customer experience, which in turn strengthens our brands, we feel we can confidently improve our subscriber forecasts for the second half of 2010 and deliver positive total net wireless subscriber additions for the remainder of the year."
Second-Quarter Results
The Overland Park, Kansas-based third-largest wireless provider in the U.S. reported a net loss of $760 million or $0.25 per share for the second quarter, wider than $384 million or $0.13 per share in the prior-year quarter. Sequentially, net loss narrowed from $865 million or $0.29 per share in the first quarter.
The results for the latest quarter include a non-cash $302 million or $0.10 per share increase in valuation allowance on deferred tax assets resulting from net operating loss carryforwards generated during the second quarter. Excluding special items, the adjusted loss per share would have been $0.15 for the latest quarter.
On average, 25 analysts polled by Thomson Reuters expected the company to report a loss of $0.20 per share for the second quarter. Analysts' estimates typically exclude the special items.
Net operating revenues for the quarter declined 1% to $8.03 billion from $8.14 billion in the same quarter last year, but came in line with twenty-three Wall street analysts' consensus estimate of $8.03 billion. Sequentially, operating revenues declined from $8.09 billion in the first quarter.
The decline in revenues was primarily due to a lower contribution from post-paid wireless service revenues and lower wireline revenues. This was partially offset by contributions from acquisitions in the fourth quarter, prepaid Boost service revenues and total equipment revenues.
Peer Performance
Among Sprint Nextel's peers, New York-based Verizon Communications, Inc. (VZ) posted last week a loss for the second quarter compare to a significant profit last year, hurt by charges related to layoffs and divestitures. However, the company's wireless segment continued to add contract subscribers after winning customers with Android smartphones. Total quarterly operating revenues edged down 0.3% to $26.77 billion from last year.
Larger rival, Dallas, Texas-based AT&T, Inc. (T) reported last week a 26% year-over-year growth in profit for the second quarter to $4.02 billion or $0.68 per share, boosted by an investment gain, and the continued growth in mobile broadband, including 3.2 million iPhone activations as well as gains in IP-based and strategic business services. Total quarterly operating revenues edged up 0.6% to $30.81 billion from the year-ago quarter.
Segmental Details
Sprint Nextel's wireless segment net operating revenues for the second quarter was nearly flat with the year-ago quarter at $7.01 billion. Of the total net operating revenues, retail wireless service revenues for the quarter declined less than 1% year-over-year to $6.40 billion. Operating loss for the segment narrowed to $287 million from $314 million in the year-ago quarter.
Wireless retail post-paid average monthly revenue per user, or ARPU, for the quarter was about $55, a decline of one dollar from last year, while retail prepaid ARPU declined to about $28 from a year ago's $34.
Wireless retail post-paid churn in the quarter was the best ever of 1.85%, an improvement from 2.05% in the year-ago quarter, primarily due to a better customer experience resulting in higher levels of customer satisfaction at every touch point.
Meanwhile, retail prepaid churn also improved to 5.61% from last year's 6.38%, primarily due to the inclusion of Virgin Mobile customers who have lower churn on average than that of Boost Mobile customers.
Sprint Nextel's wireline segment net operating revenues for the quarter were $1.27 billion, down 11% from $1.43 billion in the prior-year quarter, reflecting reduced voice volume and rate, and customer migrations from legacy data to lower rate IP services. Operating income for the segment grew to $223 million from $208 million a year ago.
Other Metrics
At the end of the second quarter, Sprint Nextel served 48.17 million customers, including 33.16 million post-paid subscribers, 11.21 million prepaid subscribers and 3.80 million wholesale and affiliate subscribers. This was down from 48.83 million customers at the end of the prior-year quarter.
During the second quarter, net wireless customers grew by a total of 111,000, achieving the first total net wireless subscriber growth in three years. Net postpaid subscriber growth was 136,000 on the CDMA network and 285,000 for the Sprint brand, and best ever year-over-year quarterly net postpaid subscriber loss improvement of 763,000.
Operating loss for the second quarter narrowed to $63 million from $113 million in the prior-year quarter. Total net operating expenses for the quarter were $8.09 billion, down from $8.25 billion in the year-ago quarter.
The company's capital expenditures for the quarter was $437 million, up 36% from $321 million in the year-ago quarter, due primarily to additional wireless spending. The company ended the second quarter with cash and cash equivalents of $4.28 billion, compared to $4.59 billion at end of the prior-year quarter.
Outlook
Looking ahead, Sprint Nextel said it expects to deliver positive total net wireless subscriber additions in the second half of 2010, and fewer net postpaid subscriber losses compared to the first half.
The company also continues to expect full-year 2010 capital expenditures to be up to $2 billion. In addition, the company expects to continue to generate positive Free Cash Flow during the remainder of 2010.
Stock Quote
S closed Tuesday's regular trading session at $4.83, down $0.25 on a volume of 94.07 million shares, higher than the three-month average volume of 67.53 million shares. In the past 52-week period, the stock has been trading in a range of $2.78 to $5.31.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.