Sprint Nextel Gets Bad Quarter

Posted by Sam Churchill on

Sprint Nextel Corp. continued to lose high-value subscribers in the first quarter, reports the Wall Street Journal, and swung to a loss, as investments in network improvements, handset subsidies and marketing led to increased costs.

The Reston, Va., wireless carrier reported a net loss of $211 million, or seven cents per share, after a profit of $419 million in the same period last year. Revenue stayed relatively flat year-over-year at $10.1 billion.

Sprint, the nation’s third-largest wireless operator, added 568,000 subscribers overall in the quarter, but posted a net loss of 220,000 “post-pay” customers, who sign annual contracts and generate the most revenue for carriers. The decline of 220,000 post-pay subs, reflects a loss of about 1.1 million iDEN subscribers, which were mostly offset by gains in CDMA subscribers, according to Sprint Nextel.

Contract subscribers paid an average of $59 a month for wireless service, down from $60 in the fourth quarter. The rate will stay roughly even in the current quarter as customers spend less on voice calls while buying more data services such as text messages, CEO Gary Forsee said on a conference call.

Sprint’s churn, or the rate at which customers switched providers, was 2.3 percent for contract subscribers, even with the fourth quarter. Churn should fall to 2 percent this quarter as defections of former Nextel customers decline, Forsee said.

Overall, Sprint added 568,000 net customers in the first quarter, including wireless users won by resellers and less profitable subscribers who pay in advance for service.

In related industry news, billionaire investor Carl Icahn stepped up a war of words with Motorola today in the latest effort to persuade shareholders to vote him to the board of the electronics giant at its May 7 meeting.

Motorola suggested that if Icahn were elected to the board, he might have trouble balancing trading restrictions as a board insider, but also as an active hedge-fund manager with obligations to his own investors.

In a letter filed with regulators, Icahn said his “$1.2 billion investment is more than sufficient incentive for me to devote all of the time and effort required to help ensure management is ‘getting it right.'” Motorola said Icahn is unqualified as a board member because he is “unfamiliar with Motorola, our industry, technologies, customers and markets.”

Posted by Sam Churchill on Wednesday, May 2nd, 2007 at 8:02 am .

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