Sprint Posts A Loss As Subscribers Defect

KANSAS CITY, Mo. — Sprint Nextel Corp. watched another 1.3 million wireless subscribers head for its competitors during the third quarter, leading the company to post a loss that sent its stock skidding Friday.

Dan Hesse, the Overland Park, Kan.-based company's chief executive, told analysts that Sprint Nextel plans to work harder to attract new customers during the upcoming holiday season but acknowledged "we have yet to turn the corner."

"We made good progress on our operational priorities in the third quarter and resolved some key issues," he said. "Still, subscriber losses are too high."

The nation's third-largest wireless provider said it lost $326 million, or 11 cents per share, for the three months ending Sept. 30. It had earned $64 million, or 2 cents per share, in the same period a year ago.

Excluding one-time items, Sprint Nextel said it would have broken even during the quarter. On that basis, analysts surveyed by Thomson Reuters expected a profit of 3 cents per share.

Sprint Nextel's revenue fell 12 percent to $8.81 billion. Analysts expected $8.85 billion.

The company's shares lost 31 cents, or 8 percent, to close Friday at $3.37.

Since its 2005 acquisition of Nextel Communications Inc., the company has struggled with technical problems, unfocused marketing and difficulties integrating operations. Despite heavy investments to correct those problems, Hesse said the company still suffers from poor perceptions in the market.

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Competing devices, such as Apple Inc.'s iPhone being sold through AT&T Inc., haven't helped, although Sprint has fought back with the Samsung Instinct and other comparable smart phones.

Sprint Nextel's wireless business reported a 13 percent decline in revenue to $7.5 billion as its subscriber base fell by 1.3 million. That included 1.1 million valuable "postpaid" customers who have contracts. That was worse than in the second quarter, when Sprint Nextel lost 901,000 subscribers, including 776,000 postpaid customers.

Postpaid churn, or the percentage of customers canceling service each month, was 2.1 percent, up from 2 percent in the previous quarter but below the 2.3 percent rate a year ago.

Hesse said the company would focus on slowing the losses of postpaid customers in the fourth quarter and expected the churn rate to be similar to the third quarter.

"Stabilizing revenue will be a focus area of ours going forward," he said.

JP Morgan analyst Mike McCormack said in a research note Friday that Sprint's "subscriber trends and guidance ... do not signal near-term improvement" and said he would continue to warn investors away from the stock, which has lost more than 70 percent of its value this year.

Also Friday, Sprint Nextel said it had changed the terms of its credit agreement, reducing the amount it can borrow to $4.5 billion from $6 billion but increasing the allowed debt ratio to 4.25 times earnings before taxes and other adjustments, up from 3.5 under the previous deal.

The company said it will pay higher interest under the new agreement and cannot pay cash dividends unless certain conditions are met. The company doesn't currently pay dividends to common shareholders.

Sprint also said it repaid $1 billion of the outstanding loan under the amended credit agreement.

Stifel Nicolaus analyst Christopher King said the debt moves likely would be viewed positively because they give Sprint Nextel "ample flexibility through the maturity of the agreement in 2010."

Sprint Nextel sits behind AT&T and Verizon Wireless in third place with 50.5 million customers. It fell further behind in the third quarter as AT&T and Verizon Wireless added 2 million and 1.5 million subscribers, respectively. Both said most of their new customers defected from other carriers.

Sprint Nextel said last week it was planning to hold on to its Nextel-branded network, which operates on a separate technology and has been responsible for a good portion of the subscriber losses. The move was seen as an indication that the faltering economy and tough credit environment made it impossible to sell the network at a reasonable price.

Comments

[rjmiller]

Solution: Publicly offer and market the $30/month Sprint SERO plan (Sprint Employee Referal Offer: sprint.com/sero).

This is the single best phone plan in the country, hands down. For $30/month I get 500 minutes (7pm nights and weekends), unlimited text messaging and most importantly: UNLIMITED DATA. That's right, all of the searching and downloading I want with zero additional charges. Did I mention that this includes phone-as-modem use? Seriously.

That sort of deal is unheard of anywhere else. They could even offer it for $40-50 and still be way ahead of the curve, and it would grab a fat market share for heavy internet users.

Currently, they're marketing an unlimited everything plan for $100/month. Unfortunately, there is a much larger share of the market that goes for the cheapest possible plans than the expensive all-included plans. Sprint doesn't seem to realize that in a period where people are cutting back on spending that they need to offer low-cost solutions.

[SeenItBefore]

Only two positive comments... well, mine won't be positive either. We went to Sprint in 'o2 as they were the first in our part of the Texas Hill Country to have a tower. We were tired of always getting kicked to "roam" or suffering dropped calls. Over the last 6 years I have been denied a newer phone, lied to about 3 dozen times by Sprint operatives, put on endless hold (one time for so long my battery discharged) , and as of today, have NEVER had a request granted or a problem solved.

We also tried the "vacation plan", Sprint's $5.00 bold faced lie when we were in the South Pacific. We came back, tried to re-activate our phones and discovered we were now in a new contract at an alarmingly higher rate. One month we exceeded our contract minutes by 200 odd minutes and was charged $700.00 over our contract rate of $109 a month.

And this load of manure regarding Sprint to Sprint. Your minutes get used up! Sprint doesn't care you talk to... the clock is running constantly. We have a family plan and have called each other in the office with a clear view of the Sprint tower a mile away and was hit with out of area roaming charges.

Sprint is run by the new American corporate maf-ia . Sprint is and always will be, a pack of thieves!

[reactionrynihilist]

I wish I could enjoy shedenfrued, I left Sprint years ago and then came back to try and join a family plan with my wife. I say try, because for some reason we now have two separate accounts and for a year I have been trying to fix it but the Kafkaesk customer service doesn't even seem to be able to recognize that we have two accounts. I gave up and I bet they won't even be able to figure out how to close out an account that they can only seem to bill me for, but nothing esle.

[sandiaview]

Qwest had a piggy-back on Sprint network for the past five years but recently they signed a new 5 year agreement with Verizon so their 1.5 million customers are gone. Verizon is servicing the Qwest customers so I think that they are pulling a fast one on the public and the FCC. They are combining forces and they are charging higher fees.

[CarmanK]

I am not surprised at this information. I was a long time Nextel/sprint customer and switched because they had bad customer service, were disrespectful when trying to work our billing issues and were quick on the trigger to sever service . I didn't want to change, but I didn't have a choice. I loved their phone service, but they had no respect for their customers. So, perhaps, if they try harder and begin to understand to value each customer they may be successful in rising again. I am not happy paying the prices I am paying for wireless now, but then again when I complain, they listen and most of all the company acts to address my issues..

[wildroots]

Sprint has not just bad, but criminal customer service. I bought a phone online and was charged for overnight shipping even though I requested regular shipping. They also offered me a discount for buying online. Not only did they refuse to remove the shipping charge which I never authorized they refused to give me the discount until a supervisor "reviewed the recording" of the conversation in which I was offered the discount, a process which was supposed to take a day, but I never heard back from any supervisor either way. This is over several phone calls over an hour or more at a time. I think their philosophy is to charge what they want and wear the customer down over time to avoid addressing errors. I've been a customer of theirs for 6 years and their customer service has gotten consistently worse.

I'll agree that if you talk to different agents you will get different stories on overcharges, etc. on your bill. But not necessarily in your favor.

Worst customer service EVER!

[cephalgia]

I recently gave up my cell phone and it was the best decision ever. The whole cell phone culture has gotten out of hand. I can't do much as one person against a world that needs its cell phone surgically attached to itself, but I don't have to participate in it.
Now I feel like Braveheart screaming, "Freedom!"

[voter42]

Isn't Sprint the company that dropped customers a few yrs ago, that they felt called custoner service too much? I guess what goes around comes around....

[rpr]

There is a very simple reason for all this:
The GSM/UMTS family of technologies that eg AT&T and T-Mobile use have won and the CDMA family that Sprint/Nextel uses has lost. As a result, the GSM protocols evolve much faster with higher speeds and new features, and new phones (eg iPhone) are available first (or only) and at better prices for GSM.
CDMA is doomed and Sprint/Nextel cannot afford to revamp their entire network to GSM (like AT&T did a few years ago.) Make your own conclusions.

[jasonpost79]

ElecticEye....nice profile. You must be educated! heh

[Thinking-It-Through]

I was a Sprint customer while my Mother was dying. To communicate with my family which were also Sprint customers, I was somehow charged a $1000 bill every month for the 6 months we struggled to keep her alive. I was paying $400/mo on the bill but the bill kept coming in at the $1K mark. I finally got it paid down to $452 but was financially devastated with Mom's expenses. I tried to work out payment arrangements but they sent me to collections. Years later, I settled it for $50. It affected my credit but the aggravation and intermittent loss of communication they cost me at one of the worst times of my life was considerably worse. To Sprint, I say, you reap what you sow even if it takes six years....

[Sandy248]

I'm about to become a former Sprint customer. Here's why: I'm in the military & I got assigned to Korea. I signed a contract so I called Sprint & asked for the $5 per month sleep mode. I get to Korea & they put me on Sprint Korea plan but the phone said roaming. I don't use the phone but Sprint billed me $27.00 a month. I'm not pleased but I pay it because I signed a contract. I go on leave & since I've been paying Sprint I thought I could use my phone but I couldn't. I call customer noservice but they claimed that they were updating their computers & NO ONE could speak to anybody. I wait a few days & finally get my stateside service turned back on. I return to Korea & call customer service & explain that I'm leaving the states & the agent was excellent & he put me on the $5 a month service that I wanted at first. I finish my tour in Korea & get to Hawaii & call Sprint customer service to turn my phone back on, I'm informed that my previous plan no longer exists (even though I signed a contract) & she pressures me to pick a more expensive plan & contract. I told her not now so I'm being charged $.75 a minute which can add up but my contract expired Friday & I'll be terminating my service with Sprint on Monday. I've been a customer

[average Joe]

Anytime we call the customer service for any company, we should ask where are you located and what is your real name.......The companies should be held accountable for giving bad service...

[soshea51]

Doesn't do any good. Have done this scores of times. They just make up names and ID numbers. Don't have to energy to go through all the problems I have had, but have to say I will be pleased when they finally do themselves in.

[average Joe]

It is time for Govt Regulation in every field...All the private corporations were for profit and outsourced everything out...Manufacturing to China and Services to cheap foreign labor in India, Phillipines,etc..

We do not have any customer service left in US...all we get is a foreign guys asking us to take the deal or leave it....we used to get such good service about 5 years back....This is payback time for all the US Corporations that are outsourcing more and more jobs !!!

[Horus45]

I dropped Sprint because they just got too expensive!
They were raising rates every year.