Light Reading
Income is down 94 percent as WiMax spending and other costs take their toll

Sprint's Profit Dive

Dan Jones
LR Mobile News Analysis
Dan Jones, Mobile Editor
8/8/2007
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Sprint Corp. (NYSE: S) says it spent $51 million on WiMax during the second quarter of this year in preparation for a nationwide launch in April 2008.

That figure helped contribute to a 94 percent earnings drop for the quarter, the company said today. The carrier made a profit of $19 million on $10.16 billion in revenue in its second quarter, which ended June 30, down from income of $370 million on revenue of $10 billion a year ago.

Nonetheless, WiMax could eventually prove to be important for Sprint since wireless is the area in which the company is growing -- albeit not as fast as larger rivals AT&T Inc. (NYSE: T) and Verizon Wireless -- while wireline stagnates.

Wireless revenue for the quarter is up more than 3 percent from $8.8 billion, while fixed-line revenue is flat at $1.6 billion.

Sprint added 373,000 subscribers for the quarter but continued to lose some of its most valuable enterprise customers from the Nextel side of the house. By comparison, AT&T and Cingular both added more than 1.5 million customers this quarter.

Data revenues were a bright spot for Sprint, despite a seasonal decline in average revenue per user (ARPU) overall to just above $60 for monthly subscribers. Total data service revenues increased 4 percent from the previous quarter and 40 percent from the second quarter last year. Data ARPU was around $9.75, or about 16 percent of total ARPU. CDMA network users spent approximately $12.75 monthly for data.

Heavy data usage could be an early indicator that WiMax might be a success with Sprint users. The new network offers better-than-3G download speeds. It remains to be seen exactly how much the operator's network deployment deal with Clearwire LLC (Nasdaq: CLWR) will reduce its WiMax spending during the coming quarters. (See Clearwire & Sprint Team on WiMax.)

Sprint investors, however, are still suffering from bottom-line shock syndrome. The operator's shares dropped 45 cents, or 2.23 percent, to $19.77 during the day on the news of the drastic profit fall.

— Dan Jones, Site Editor, Unstrung

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