Sprint Slows to a Crawl

The big problem, say some investors, is integration. Sprint faces big challenges trying to weld together two entirely separate national wireless networks. Nextel had the most loyal and highest-paying customers in the industry, and Sprint seems to be having trouble keeping them in the fold, say observers.

As the No. 3 wireless player, Sprint has been squeezed by the twin titans of Cingular, co-owned by AT&T (T Quote) and BellSouth (BLS Quote), and Verizon Wireless, a joint venture of Verizon (VZ Quote) and Vodafone (VOD Quote).

For one, you have fewer new customers to sell to since there are now more mobile phone owners than non-owners. Second, Verizon Wireless has been attracting new customers with offerings like family plans and robbing users from other carriers, says Yankee's Entner.

That basically leaves T-Mobile, the U.S. wireless unit of Deutsche Telekom (DT Quote), and Sprint with the youth market, and that is slowing down, says Entner.

Another problem is that with the flight of Nextel users, Sprint is losing its most lucrative customers.

"When you churn Nextel subs, you are churning higher-margin subs," says one New York money manager who has no Sprint position.

Looking ahead, Sprint projects lower wireless revenue, putting its full-year sales target at about $41.25 billion. Analysts were looking for $43.2 billion in sales this year.

The company did try to offset the gloomier outlook by announcing a $6 billion share buyback program over the next 18 months.

Sprint shares fell $2.92 to $17.21 in early trading Thursday.