Business :: Corporate

Sprint Feels Pain of Nextel Close, Widens 2Q Loss

Wednesday Jul 31, 2013
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Sprint Corp., the ailing No. 3 of the U.S. wireless business, has had the surgery. Now it’s in for a trying recovery period.

In the last few months, Sprint has sold a majority stake to Softbank Corp. of Japan, bought the failing Clearwire network and shut down its own Nextel service, which had dogged its results for years.

Sprint is now racing to make up for lost time. With the help of Softbank’s cash, it’s quadrupling its capital spending to make up for years of underinvestment in its network, which lags those of competitors in terms of data speed and coverage. That’s good for subscribers but not necessarily good for investors who are exasperated with the company’s 23 consecutive quarters of losses.

CEO Dan Hesse said Tuesday that he expects Sprint to have a hard time gaining subscribers on its contract-based plans, which generate the most revenue, until next year, when the company fires up new antennas on its cell towers and has phones that can take advantage of them.

Sprint’s second-quarter results, reported Tuesday, were hampered by the shutdown of the Nextel network, which it bought in 2005. It was popular for its push-to-talk feature, which let phones work like walkie-talkies. The service, however, wasn’t compatible with Sprint phones and didn’t support wireless broadband, which is necessary for smartphones. The cost of running two incompatible networks was a big part of the reason Sprint hemorrhaged money for years.

The quarter was "ugly, but no worse than expected," said Kevin Smithen at Macquarie Capital.

Sprint lost more than 2 million wireless customers in the quarter, most of which were on Nextel. Sprint managed to convince only 34 percent of the 1.3 million departing Nextel subscribers to sign up for Sprint service, a lower figure than some analysts expected, given Sprint’s past success with conversions.

Sprint gained 412,000 subscribers by buying U.S. Cellular coverage areas in Chicago and parts on the Midwest in May. Separately, it bought out the minority shareholders of Clearwire Corp., a wireless network operator of which Sprint already owned a majority. That acquisition closed after the end of the quarter.

Sprint’s net loss grew to $1.6 billion, or 53 cents per share. It lost $1.4 billion, or 46 cents per share, a year ago.

Excluding unexpected charges related to the Nextel shutdown, the adjusted loss came to 31 cents per share. Analysts polled by FactSet expected a loss of 30 cents per share.

Revenue rose to $8.88 billion from $8.84 billion thanks to the U.S. Cellular acquisition.

Sprint’s stock rose 23 cents, or 4 percent, to $5.97 in morning trading. The day’s high of $6.02 was the highest level since SoftBank Corp.’s deal to acquire 78 percent of Sprint closed on July 10.

SoftBank paid $21.6 billion for the Sprint stake. Shareholders got $7.65 per share.

Sprint had 53.6 million subscribers by June’s end, down from 55.2 million at the end of March.

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AP Business Writer Ryan Nakashima contributed to this report.

Copyright Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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