| Earnings Scorecard |
| Actual | Estimated* | Year-Ago |
| -$0.53 | -$0.53 | -$0.75
|
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Updated from 7:58 a.m. ET Sprint PCS Group (PCS Quote - Cramer on PCS - Stock Picks) Thursday posted fourth-quarter results in line with analysts' expectations, while at the same time it reaffirmed its guidance for the current quarter and year despite worries of an economic slowdown.
However, there was some disappointment that
Verizon Wireless, the largest wireless service provider in the U.S., ate into Sprint's number of new subscribers, which meant that Sprint, the fourth largest carrier, didn't dramatically beat projections.
The company recorded a net loss $512 million, or 53 cents a share, for the period, compared to a loss of $706 million, or 75 cents a share, a year earlier.
Net operating revenue rose to $1.94 billion from $1.06 billion a year ago. (That figure includes revenue from Sprint's affiliates. Affiliates are companies that assist larger carriers with the buildout of a nationwide network.)
Analysts will scrutinize the number of net new subscribers recorded by Kansas City, Mo.-based Sprint in the quarter, which came in at almost 1.25 million, excluding affiliates, an increase of 20% from the third quarter and 19% from the year-ago quarter. The net new adds figure is one of the most important measurements of a wireless carrier's growth prospects. Sprint is usually a leader when it comes to adding new subscribers, and the company's failure to significantly surpass expectations is ascribed to the aggressive promotions and incursion into one of Sprint's traditional distribution channels by Verizon Wireless.
"Sprint's number will be received as kind of in line or ho hum," says Bill Benton, an analyst with
William Blair & Co. (He rates Sprint PCS a strong buy, and his firm hasn't done underwriting for the company.)
Verizon, a joint venture between
Verizon Communications (VZ Quote - Cramer on VZ - Stock Picks) and
Vodafone (VOD Quote - Cramer on VOD - Stock Picks) of the U.K., added 1.2 million net new customers in the fourth quarter, a 49% increase from the third quarter. Some observers say Verizon needs to be aggressive to show subscriber strength ahead of the initial public offering it hopes to pull off this year.
Sprint's churn, a yardstick of customer turnover, came in at 2.8%, an improvement from the third quarter's 3%.
The company also reaffirmed its earlier guidance, though on a conference call Chief Financial Officer Arthur Krause counseled a "degree of caution in the near term," given that "some signs of a slower economy and significantly higher energy costs may have an impact on discretionary spending over the next several months."
The guidance encompassed total net adds, which should be comparable this year to the 4.1 million added in 2000. Also, net adds will be "more heavily skewed toward the latter part of the year," just as they were in 2000 when Sprint posted 45% of its net additions in the first half and 55% in the second half.
Average monthly churn also should improve as the year progresses, with churn in the upper 2% range in the first half and ending up in the mid-2% range.
A wholly owned subsidiary of
Sprint (FON Quote - Cramer on FON - Stock Picks), Sprint PCS trades publicly in the form of a tracking stock. Despite the increasing competitiveness of the wireless services market, the company possesses spectrum licenses in the top 50 markets in the U.S. and boasts a fast-growing subscriber base. The company also has distinct advantages in terms of its brand name and its ability to offer attractive pricing plans. All of this causes Sprint PCS to be bandied about as possible acquisition candidate.
Shares of Sprint PCS recently were up $1.10, or 4%, to $31.60 in Thursday morning trading.
Carolyn Koo
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