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Sprint swings to $29.5B loss in 4Q on Nextel deal write-down, ends dividends, shares dive

Sprint swings to $29.5B loss in 4Q on Nextel deal write-down, ends dividends, shares dive

Sprint Nextel Corp. swung to a fourth-quarter loss of $29.5 billion (euro19.51 billion) on Thursday as it wrote down most of the remaining value of its 2005 purchase of Nextel Communications Inc. and continued to lose customers to competitors. It said it would quit paying dividends for the foreseeable future and was tapping a revolving credit line.
Its shares tumbled 8 percent in morning trading.
Chief Executive Officer Dan Hesse, who was hired in December to turn the nation's third largest wireless carrier around, said the quarter was more difficult than he had expected and it could be some time before proposed operational changes have any effect.
During a conference call with analysts, Hesse predicted the company would lose 1.2 million valuable customers who sign an annual contracts during the first quarter and would see additional losses in the second quarter.
To counteract customer losses, Hesse said Sprint Nextel would begin offering unlimited voice and data service usage for $99.99 (euro66.13) per month. Unlimited voice only would cost $89.99 (euro59.51) per month, undercutting $99.99 (euro66.13) unlimited calling plans announced last week by rivals Verizon Wireless and AT&T.
Sprint Nextel also said that due to instability in the capital credit markets the company was borrowing from a revolving credit facility and was not declaring dividends for the "foreseeable future."
Its shares fell 72 cents to $8.24 in morning trading after briefly sinking to a 52-week low of $7.75.
Sprint reported losing $29.5 billion (euro19.51 billion), or $10.36 (euro6.85) per share, during the quarter ending Dec. 31. By comparison, Sprint Nextel earned $261 million (euro172.61 million), or 9 cents per share, during the same period a year ago.
The company said last month it would likely have to write off most of the remaining $30.7 billion (euro20.3 billion) in goodwill value from the acquisition of Nextel and a number of affiliates. Sprint Nextel has struggled since the purchase, plagued by technical problems, unfocused marketing and a difficulty in merging the two companies' work forces into a cohesive whole.
Not including the write-down and other one-time charges, the company said it would have earned 21 cents per share before amortization, which was higher than the 18 cents per share expected by analysts surveyed by Thomson Financial.
Revenue during the quarter slipped 6 percent to $9.8 billion (euro6.48 billion) from $10.4 billion (euro6.88 billion) a year earlier, just missing analysts' expectations of $9.9 billion (euro6.55 billion).
The company reported a net loss of 108,000 subscribers for the quarter as an increase in customers through its Boost prepaid brand and wholesale channels partially offset a loss of 683,000 subscribers who paid a monthly bill _ considered the most valuable.
Sprint Nextel reported quarterly postpaid churn, or the measure of these monthly customers dropping service, remained level at 2.3 percent and the average revenue per user declined about 4 percent from a year ago to $58 (euro38.36).
Sprint Nextel said overall wireless revenues declined about 6 percent to $8.5 billion (euro5.62 billion).
"We plan to share some of our initiatives for improving the customer experience and operations next quarter," CEO Hesse said in a news release. "Strategic assessments and changes may take longer to complete."
Hesse, who replaced ousted CEO Gary Forsee, already announced last month that the company would lay off about 4,000 employees, or 6.7 percent of its work force, and close 125 retail locations. Earlier this month, he moved the company's corporate headquarters from Reston, Virginia, back to Kansas, which he said should improve efficiency and management oversight.
The company's shares have fallen more than 51 percent in value in the past year.
For the year, the company said it lost $29.6 billion (euro19.58 billion), or $10.31 (euro6.82) per share, compared with a profit of $1.3 billion (euro0.86 billion), or 45 cents per share, in 2006.
Not including the goodwill writedown, the company said it earned 88 cents per share compared with $1.18 (euro.78) a year ago.
Annual revenue declined 2 percent to $40.15 billion (euro26.55 billion).


Updated : 2020-12-04 10:51 GMT+08:00