Sprint Relies on Wireless

Sprint Corp. (NYSE: FON) is predicting its wireless business will drive growth in its revenues and earnings in 2005, though its outlook doesn't include any impact from the proposed merger with Nextel Communications Inc. (Nasdaq: NXTL). (See Sprint Gives 2005 Forecast and Nextel-Sprint: Winners & Losers.)

The carrier is expecting 2004 revenues of between $27.25 billion and $27.5 billion, and earnings before interest, tax, depreciation, and amortization (EBITDA) of between $8.1 billion and $8.2 billion, in line with analyst expectations.

In 2005, Sprint expects its revenues to "grow at a low single-digit percentage rate, reflecting strong growth in wireless, steady performance in local and continuing top-line pressures in long distance," according to a statement.

If low single digits are interpreted as between 2 and 4 percent, that would put Sprint's 2005 sales at between $27.95 billion and $28.5 billion (based on 2004 revenues of $27.4 billion).

On average, analysts are expecting 2005 revenues of $28.2 billion.

The carrier also expects 2005 EBITDA to be between $8.5 billion and $8.7 billion, with wireless services driving that growth. Sprint is also directing most of its investments towards its mobile business. It predicts capital expenditures of between $4 billion and $4.2 billion in 2005, with about two thirds being spent on its wireless infrastructure.

Sprint's predictions were met with a slight increase in its share price on Monday, as it closed up 17 cents, less than 1 percent, at $24.84.

The news also met with a positive reaction from Prudential Equity Group LLC analyst Chris Larsen, who has a target price for Sprint's shares of $30.

In a research note issued this morning, Larsen raised his 2005 EBITDA estimates to $8.59 billion from $8.47 billion and his EPS estimate to $1.42 from $1.37.

The average analyst EPS estimate for 2005 is $1.39.

— Ray Le Maistre, International News Editor, Light Reading

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