Sprint Caps Bad Y With Good Q

Sprint Corp. (NYSE: FON) says its fourth-quarter profits nearly quadrupled thanks to strong growth in its wireless and data services divisions.

The carrier earned a fourth-quarter profit of $437 million, or 29 cents a share, on revenues of $6.9 billion, compared with a profit of $110 million, or 7 cents a share, on revenues of $6.7 billion during the year-ago quarter.

For the year, Sprint reported a loss of $1 billion, or 71 cents a share, on revenues of $27.4 billion, compared to a profit of $1.3 billion, or 91 cents a share, on revenues of $26.2 billion in 2003.

Sprint’s numbers continue a trend among major carriers of getting less of their profits from traditional local and long-distance wireline services and relying on growth areas like wireless and data services to generate profits (see Verizon Phones in Solid Results, SBC Puts on a Happy Face, and BellSouth's Earth Is Flat).

Sprint ended 2004 with 24.8 million wireless customers, adding 1.58 million new users in the fourth quarter. For the year, the company added 4.4 million users, up 22 percent from 2003 numbers. Its local division added 60,000 DSL customers in the quarter, bringing its total number of DSL subscribers to 500,000, an increase of more than 60 percent for the year.

Sprint’s pending acquisition of Nextel Communications Inc. (Nasdaq: NXTL) signals its intent to keep nuturing its strength in wireless (see Sprint, Nextel Confirm Merger and Sprint Relies on Wireless). ”Sprint is clearly demonstrating its ability... identify growth in the mobility and wireless services and applications markets,” says Bryan Van Dussen, director of telecom research at The Yankee Group.

With all the merger mania that has been kicked off by SBC's intent to buy AT&T, some have predicted that Sprint my be in the crosshairs of a deal (see SBC to Buy AT&T for $16B, SBC/AT&T Could Ignite M&A Frenzy, and Verizon's Sprint Bid Faces Hurdles). Adding fuel to the speculation is the fact that Sprint has cleaned up its books a bit last year, reducing its debt by $2.0 billion to $12.6 billion, and making itself a more attractive partner.

Sprint forecasts low single-digit revenue growth for 2005, with EBITDA of between $8.5 billion and $8.7 billion, and full-year capital spending between $4.0 billion and $4.2 billion.

Investors reacted favorably to Sprint’s numbers, with the stock gaining $0.08 (33%) to $24.56 in trading today. — Chris Somerville, Senior Editor, Next-Generation Services

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