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Alexa Harrison/MEDILL

Although Sprint Nextel has the third largest subscriber base in the U.S., the company has struggled to maintain subscribers in a competitive market.

Subscriber loss continues to contribute to Sprint Nextel losses

by Alexa Harrison
Feb 10, 2010

Sprint Nextel Corp.’s stock sunk 8 percent on Wednesday as the company suffered another quarterly loss attributable to subscriber shrinkage.

The Overland Park, Kan.-based telecommunications provider narrowed its net loss in the quarter ended Dec. 31, to $980 million, or 34 cents per diluted share, from a loss of $1.6 billion, or 57 cents per diluted share in the year-ago quarter. Fourth quarter results in 2008 were reduced by a one-time non-cash charge of $963 million related to tax valuation.

Sprint Nextel’s earnings fell below the analysts’ consensus estimate of a loss of 15 cents per diluted share as compiled by Bloomberg LP.

Revenue fell to $7.9 billion from $8.4 billion in the year-ago quarter, a 6.7 percent decrease.

Sprint Nextel generated $666 million in free cash flow for the quarter and $2.8 billion for the year.

“Sprint’s performance built notable momentum during the second half of 2009, leading to a fourth quarter with the best sequential and year-over-year improvement in net post-paid subscriber results in Sprint Nextel history, and positive post-paid net subscriber growth for services carrying the ‘Sprint’ brand,” said CEO Dan Hesse in a press release.

William Power , an analyst with Robert W. Baird and Co. Inc. in Houston, said the results raise two concerns. The first is that the company does not expect profit margins to improve near term., and the  second is the company expects further challenges in the market for prepaid subscriber growth in first quarter.”

“I think the company is making progress, but it's a long slog. It's a very competitive environment out there. They just need to work on sustaining the progress they've made,” Power said. Robert W. Baird expects to receive investment banking related compensation from Sprint Nextel within the next three months.

Sprint Nextel projected that both post-paid and total subscriber losses will improve in 2010, full-year capital expenditures will increase to $2 billion and it will continue to generate positive free cash flow.

Analysts estimate a loss of 12 cents per diluted share for the quarter ending in March. Last year’s first quarter results were a loss of $594 million, or 21 cents per diluted share.

In the year ended Dec. 31, Sprint Nextel narrowed its loss to $2.4 billion, or 84 cents per diluted share, from a $2.8 billion loss, or 98 cents per diluted share, in 2008. Revenue for all of 2009 decreased 9.5 percent to $37.3 billion from $35.6 billion in the prior year.

The stock closed at $3.36 on Wednesday, down 29 cents.