Sprint Nextel Reports Second Quarter 2007 Results
-- Subscriber base increases by nearly 400,000, to 54 million; lower churn contributes to positive post-paid net additions
-- Higher post-paid ARPU and cost reductions drive strong sequential improvement in profitability
-- Continued strength in wireless data and Internet Protocol (IP) services
-- Substantial progress on efforts to enhance core business and launch strategic initiatives
-- Company stock buyback of $1.1 billion in the quarter
Second Quarter Segment Results
Wireless
-- Total revenues of $8.8 billion, an increase of 3% year-over-year and 1% sequentially; data revenues increased 40% compared to the year-ago period
-- Adjusted Operating Income* of $494 million, a decline compared to the second quarter of 2006 but a strong improvement from the first quarter
-- Adjusted OIBDA* of $2.67 billion exceeds capital investment by $1.3 billion
Wireline
-- Total revenues of $1.6 billion, flat with the year-ago period and an increase of 2% sequentially; 37% growth in IP revenues year-over-year
-- Adjusted Operating Income* of $126 million, a decline from the second quarter of 2006, but a significant increase quarter-over-quarter
-- Adjusted OIBDA* of $259 million exceeds capital investment by $114 million
RESTON, Va.--(BUSINESS WIRE)--Sprint Nextel Corp. (NYSE: S - News) today reported second quarter 2007 financial results. In the quarter, the company reported a strong sequential improvement in post-paid net additions and profitability. The company experienced continued strong demand for wireless data services and wireline IP services and growth of the base of PowerSource(TM) subscribers. Sprint Nextel also continues to build momentum around its planned WiMAX offering and to achieve key milestones in the development of high-performance push-to-talk services to be delivered on its CDMA network.
In the second quarter of 2007, diluted earnings per share (EPS) from continuing operations was 1 cent, compared to 10 cents in the second quarter of 2006, and a loss of 7 cents per share in the first quarter of 2007. Adjusted EPS before Amortization* was 25 cents, compared to 32 cents in the year-ago period and 18 cents in the first quarter of 2007. The yearly decline in earnings per share is due to a lower contribution from operations, start-up costs associated with the WiMAX initiative and increased net interest expense, partially offset by fewer common shares outstanding. The sequential improvement is due to a stronger contribution from operations.
Consolidated net operating revenues of $10.2 billion in the second quarter were 2% above the year-ago period and increased 1% sequentially. Consolidated adjusted OIBDA* of $2.9 billion declined 10% from the second quarter of 2006 but increased 12% sequentially. Second quarter capital expenditures were $1.7 billion and free cash flow* was $183 million.
Post-paid net additions increased more than 235,000 from the first quarter and were a positive 16,000 for the quarter. In the quarter, Sprint Nextel experienced strong post-paid demand on the CDMA platform. These gains were offset by lower demand for iDEN post-paid services. MVNO partners reported solid growth in what has typically been a seasonally weak quarter. At the end of the period, the company had enrollments of approximately 100,000 subscribers for the trial of the Boost Mobile unlimited local calling plan. These subscribers are reflected in the pre-paid subscriber category.
"A year ago, and again in January of this year, we highlighted areas for improvement in our core operations and outlined investments we would be making to address these areas. These investments are focused on improving iDEN network performance, increasing customer retention, enhancing our brand image and reinvigorating our third-party channels," said Gary Forsee, Sprint Nextel chairman and CEO. "In the second quarter, Sprint began to realize benefits from our increased funding of business operations. We reported a double-digit gain in subscriber acquisitions in our business channels. We met our goal of reducing churn to 2.0%, and network performance continued to improve. Industry-leading average post-paid customer revenues of $60 in the quarter and staffing actions in the first quarter supported a strong sequential improvement in adjusted OIBDA.
"Overall we are pleased with the second quarter progress under highly competitive market conditions, and we are reiterating our 2007 targets for revenues, adjusted OIBDA and capital spending," Forsee said. "Our focus remains on closing churn and customer care gaps, building on our recently-launched Sprint Ahead marketing campaign, and extending the EVDO footprint to meet strong demand for wireless data services. We will also continue to have significant resources assigned to the consolidation of many of our major systems, migrating customers from iDEN to CDMA utilizing PowerSource devices, preparing for the deployment of high-performance push-to-talk on our CDMA network, and cementing our plans for WiMAX deployment. While these initiatives are expected to impact reported results in the near term, we expect they will produce significant value over the long term."
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