The Other Shoe: More Than Pins Dropping at Sprint

Sprint's (FON Quote) bad news may get worse.

In the wreckage of its failed merger with WorldCom (WCOM Quote), Sprint is preparing to tell Wall Street to lower its earnings expectations for the company, says one person close to the firm.

"It's not going to be a pretty picture," says the person. (TSC wrote an earlier story about the deal's problems.)

It was unclear what time period Sprint's revisions will affect. Analysts expect the company will earn 49 cents a share this quarter, $1.99 a share this year and $2.42 a share next year, according to I/B/E/S.

Sprint declined to comment.

Back on its own, Sprint may have to shell out much more than expected on capital expenditures to boost its competitive stature. (TSC looked at the company's prospects as an independent company in a story earlier Tuesday.) For instance, it's expected to have to spend more on its local-access strategy, the person says. Sprint presumably was counting on WorldCom to give it a strong foothold in local phone and data services to businesses.

Sprint also may have not pushed as hard while waiting for the merger to close, forcing it to play catch-up even more. There's no shortage of rival communications companies, known as competitive local exchange carriers, or CLECs, cobbling together access lines and local networks in order to win big-ticket corporate customers. So Sprint, the nation's No. 3 long-distance provider, has to decide how it will readdress this local market without WorldCom, while convincing investors of the plan's merits.

If investors and analysts, who may already be questioning Sprint's value, don't like what they hear, the bad news could continue.