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

materialgirl 12/5/2012 | 12:58:43 AM
re: Sprint Relies on Wireless The service provider message of "growth in wireless, stable local and pressures in long distance" is such a broken record. Until those local services, including wireless, pump enough bits through the backhaul networks that they stop shrinking, no justification exists to further investment there. This makes talk of core cap-ex growth in 2005 sound pre-mature.

It is also questionable why this news would help Sprint stock. It sounds like an estimate reduction to me, led either by slower wireless growth or faster long distance shrinkage. 2005 should be a total slugfest for 3G wireless market share.
OldPOTS 12/5/2012 | 12:58:42 AM
re: Sprint Relies on Wireless Does this mean that services like VOIP will find cheap long haul until it fills up and then it will have to finance CAPEX?

Just wondering.

materialgirl 12/5/2012 | 12:58:36 AM
re: Sprint Relies on Wireless Yes. However, as you substitute circuit switched voice transport with VoIP packets, we seem to have a way to go. It is a story of strong disinflation on moderate unit growth leading to overall revenue declines. The packet network capacity is so huge, the addition of voice will barely be noticable. The question remains how much they must over provision to deliver acceptable voice quality.
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