Sprint Nextel 3Q Income Misses Estimates [AP]
Summary: Sprint Nextel shares rose 6.66% yesterday on what was generally perceived as a weak earnings report. The company reported a 52% decline in 3Q net income, on a loss of local revenue contributions from its local telephone business, which was spun off in May. The wireless-service provider also reported a sharp fall in subscriber growth from the second quarter, adding only 233,000 new subscribers total (vs. 700,000+ last quarter), including cancellations (which increased from 2.1% to 2.4%). Sprint's new subscriber growth paled in comparison to Cingular Wireless' announcement it added 1.4 million new subscribers during the last quarter. Verizon Wireless is also expected to announce sizable gains to its wireless subscription service, though it has yet to officially report on the matter. On the conference call, Sprint explained the weak subscription numbers a result of its plans to focus on higher-credit customers, in an effort to boost profitability. Sprint is also undertaking capital expenditures that will cut into margins in the near term including improving its network infrastructure to improve call quality, a plan to offer aggressively priced cellular phones in the fourth quarter, and an acceleration in its wireless-broadband deployment. None-the-less, full-year capex forecasts of $7 billion to $7.1 billion were maintained. Will all the negatives, Sprint only missed consensus EPS estimates by 1 cent leading investors to breathe a sigh of relief that things weren't worse and bid the shares up $1.18, or 6.66% to $18.90, in composite trading.
Related links: Sprint Nextel Q3 2006 Earnings Call Transcript • Sprint's Defection Rate Spells Trouble • Sprint Nextel: All You Need is Patience • Rob Black's Telecom Stock Report • Sprint Nextel Net, Hit by Unit Spinoff, Tumbles by 52% [WSJ]
Potentially impacted stocks and ETFs: Sprint Nextel (S), Verizon (VZ), AT&T (T), BellSouth (BLS), Comcast (CMCSA) • Vanguard Telecommunication Services (VOX), Wireless HOLDRS (WMH)
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