Doom and Gloom: Sprint Nextel Profits Nosedive

Sprint Nextel has received plenty of attention recently for its plans to roll out a new kind of high-speed wireless Internet service. But in light of its earnings report on Monday, some analysts are saying that what it needs more is customers.

Sprint, the nation’s No. 3 carrier, is facing stiff competition from AT&T and Verizon Wireless after its floundering merger with Nextel. In the first quarter, the company lost 1.1 million subscribers; the total number dropped to 52.8 million. Churn, or customer turnover — a measure of how unhappy customers are — is on the rise, climbing to 2.45 percent from 2.3 percent in the previous quarter.

To make matters worse, said Craig Moffett, an analyst at Sanford C. Bernstein & Company, Sprint is losing its best and biggest-spending customers, which will only make it harder to turn the company around.

“Sprint’s management is taking an admirably sober approach, and it is at least talking about the core issues — lax credit standards, high involuntary churn, lack of a compelling consumer value proposition, weak customer service, a subpar network, and, well, you get the idea,” Mr. Moffett wrote in a research report. “There’s a lot wrong. But even if they work on this daunting list of problems, new problems keep intruding.”

Daniel R. Hesse, Sprint’s new chief executive, was candid about the company’s customer service issues, which have persisted for more than a year. “The issues haven’t changed,” he told analysts on a conference call after the release of the earnings report.

But whatever steps Hesse has taken have not yet been enough to stem the tide of losses that has plagued Sprint for more than a year. The company said it had a loss in the first quarter of $505 million, or 18 cents a share, compared with a loss of $211 million, or 18 cents a share in the period a year earlier. This year’s number included one-time costs related to Sprint’s merger with Nextel in 2005, which so far has proved to be a costly failure for the two companies.

Without the charges, Sprint had first-quarter income of 4 cents a share, compared with 18 cents a year ago. That was above the expectations of Wall Street analysts, who had expected a profit of 2 cents a share and revenue of $9.4 billion, according to a survey of 26 analysts by Thomson Reuters.

The company said revenue fell 8 percent, to $9.33 billion from $10.09 billion in the first quarter of 2007.

http://www.nytimes.com/2008/05/13/technology/13sprint.html?ref=technology