America’s third biggest mobile phone provider, Sprint Nextel, reported a
staggering fourthquarter loss of $29.5 billion, after writing off most of the
remaining value of Nextel Communications, which it acquired in 2005.
This marks the fifthlargest quarterly loss by an S&P 500 company since 1990,
and essentially confirmed what investors had failed for months – Sprint’s
acquisition of Nextel has turned out to be an unmitigated failure for the
Shares in Sprint were down 9.6% yesterday after the company warned of continuing
subscriber losses this quarter and announced that it would stop paying dividends
for the “foreseeable future.” The stock has lost more than half of its value in
the last 12 months.
The $29.7 billion voluntary reevaluation, canceling out the majority of Nextel’s
$36 billion value, was coupled with Sprint’s announcement that it had borrowed
$2.5 billion under a revolving credit line.
Sprint has been bleeding customers to rivals like AT&T and Verizon Wireless for
over two years now as it struggles to integrate the Nextel brand name and
products under its own corporate umbrella.
“The fourthquarter financial results reflect the challenges facing our wireless
business,” commented Sprint CEO, Dan Hesse, a former Embarq executive who was
appointed to turn the wireless giant around. “We are making significant changes
across the organization in an effort to improve execution, stabilize our
customer base and deliver on the opportunity provided by our assets.”
“Given current deteriorating business conditions, which are more difficult than
what I had expected to encounter, these changes will take time to produce
improved operating performance, and our nearterm subscriber and financial
results will continue to be pressured,” Hesse admitted. “We will have a
difficult 2008 as we turn this ship around. This turnaround will not happen for
Sprint suffered a net loss of 683,000 postpaid cell phone customers during the
fourth quarter, while average revenue per user (ARPU) declined $2 to $52, and
quarterly subscriber churn rose to 2.3%.
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