Earnings drop 52 percent and subs disappoint again in Q3

Dan Jones, Mobile Editor

October 26, 2006

2 Min Read
Sprint Nextel Struggles Continue

Sprint Corp. (NYSE: S) reported another downbeat quarter today, with earnings down 52 percent and poor subscriber numbers for the three months that ended on September 30th.

The No. 3 U.S. cellular operator, Sprint reported net income of $247 million for the quarter -- down from $516 million a year earlier, despite a 35 percent jump in revenue, to $10.5 billion from $7.8 billion a year ago. Sprint Nextel closed its merger in the middle of the third quarter last year. (See Sprint Nextel Completes Merger.)

Sprint officials attributed the decline in profit to the spin-off of the company's local phone unit -- Embarq Corp. (NYSE: EQ) -- and the continuing costs of its merger with Nextel.

Sprint added only 233,000 new customers in total in the third quarter. In comparison, top-ranked rival Cingular Wireless said this week that it added 1.4 million new subs in the third quarter of 2006. (See Cingular's Subs-stantial Quarter.)

"With a large dropoff in gross additions and a sharp increase in customer defections, the company’s Nextel-branded iDEN subscriber base, not counting customers it acquired from Nextel Partners, stands almost exactly where it was at the time the Sprint Nextel acquisition was completed in August 2005," wrote Technology Business Research Inc. (TBR) analyst John Byrne in a research note. "During that same time period, Verizon Wireless has added over 7 million net new postpaid retail customers and Cingular has added over 3 million."

Wireless data, however, remains a bright spot for Sprint. The company reported average data revenue per user of $7.75 for its postpaid users, including approximately $10 among postpaid CDMA customers.

Like many analysts, Byrne sees this as an indication that customers are demonstrating an appetite for advanced services where Sprint Nextel has a lead -- such as streaming audio and video and downloadable music. "This bodes well for Sprint Nextel in the long-term but there are a lot of moving parts that the company needs to get a handle on before it is truly able to take advantage of its leadership position in mobile data."

— Dan Jones, Site Editor, Unstrung

About the Author(s)

Dan Jones

Mobile Editor

Dan is to hats what Will.I.Am is to ridiculous eyewear. Fedora, trilby, tam-o-shanter -- all have graced the Jones pate during his career as the go-to purveyor of mobile essentials.

But hey, Dan is so much more than 4G maps and state-of-the-art headgear. Before joining the Light Reading team in 2002 he was an award-winning cult hit on Broadway (with four 'Toni' awards, two 'Emma' gongs and a 'Brian' to his name) with his one-man show, "Dan Sings the Show Tunes."

His perfectly crafted blogs, falling under the "Jonestown" banner, have been compared to the works of Chekhov. But only by Dan.

He lives in Brooklyn with cats.

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