Sprint PCS Predicts a Sharp Climb for Profit Next Year

Updated from 4:28 p.m. EST Sprint PCS (PCS Quote) expects some big improvements in 2002.

Speaking to a congregation of analysts intrepid enough to head to Kansas in December, the wireless carrier outlined its plans for 2002. The company expects to use its rapidly increasing customer base to drive a 30% increase in revenue and an 88% rise in profit before taxes, depreciation and amortization. Impressive as those numbers may be, the company's increasing size will mean less flattering performance in some of the metrics the Street uses to measure a carrier's progress.

Sprint PCS finished the third quarter with 14.4 million subscribers, including those of its affiliates, and it expects to finish 2001 having signed up 4.2 million new customers throughout the year. The growth was driven by its popular "account spending limit" plans that appeal to the "subprime" credit quality customer. Next year, however, the carrier forecasts a decline in additions, to 3.6 million or 3.7 million. Similarly, Sprint PCS doesn't see any great strides to be made in average revenue spent per user each month, and it hopes that with ever-expanding ranks it can hold the number steady with 2001 levels. In the second and third quarters, customers spent $62 a month on average.

The company says revenues will grow from a range of $9.7 billion to $9.8 billion in 2001 -- a 50% jump over 2000's results -- to $13 billion in 2002. The carrier plans to squeeze $3 billion to $3.1 billion in EBITDA from those revenues, compared with a projected $1.6 billion in 2001 EBITDA. Sprint PCS expects to improve pretax profits by reducing the amount it spends on customer support. ...