Updated from 9:17 a.m. EDT

Sprint

(FON)

warned Friday that its earnings from its telephone services business may not meet Wall Street expectations this year and will likely fall short in the following year as well, and said revenue growth would likely slow in its wireless business over the next couple years.

Shares of Sprint's wireless unit,

PCS Group

(PCS)

, closed Friday down $8.06, or 22%, at $28.50.

Shares of Sprint's FON Group finished up $1.38, or 6%, at $23.88, still within two dollars of the 52-week low of $21.88 set in mid-October. The stock which has lost about two-thirds of its value since the start of the year, was downgraded Thursday by

Credit Suisse First Boston

to buy from strong buy.

Slower Growth

In a news release detailing the guidance it would offer to analysts at its annual meeting Friday, Sprint said it expects earnings at its FON Group to range from $1.80 to $1.90 a share in 2000, after strategic investments, with 3% revenue growth. On average, analysts surveyed by

First Call/ Thomson Financial

had expected the FON Group to earn $1.90 per share for the year.

Sprint said earnings are projected to be even lower in the next fiscal year for its FON Group, the nation's third largest long-distance company, ranging from $1.65 to $1.75 a share. That's far below the consensus forecast among analysts of $2.10-a-share earnings in 2001, according to First Call/Thomson Financial. But Sprint projected that earnings growth should accelerate by 2003, climbing to $2.68 a share.

The rate of revenue growth for the unit is expected to improve in upcoming years, growing in the mid-single digits next year and at a double-digit rate in 2002.

The company cautioned that both revenue and earnings estimates could be lowered if pricing pressure in the long distance business increases. Sprint's warning follows similar statements from the country's two largest long-distance companies, which have recently cut their earnings outlooks and announced plans to refocus their businesses.

Worldcom

(WCOM)

warned Wednesday that its earnings could be lower than expected for both the fourth quarter and full fiscal year.

In late October, the nation's largest long-distance company

AT&T

(T) - Get Report

said it would

split into four separate entities, with the business services unit serving as the core company under the AT&T name. AT&T's consumer telephone business will be represented by a tracking stock, while its wireless and broadband cable divisions would have independent common stocks.

Wireless Strategy

In a statement Friday, Sprint's chairman and chief executive, William Esrey, said his company plans to continue building the company into a "wireless powerhouse" -- the company's PCS Group already serves about 7.4 million subscribers -- and transition it's FON Group from voice services into the high-growth, data-driven business.

Sprint said it hopes to expand its data and broadband business to account for 50% of FON Group revenues by 2003. Currently, the company's data services comprise just 30% of revenues for the group.

Sprint also said Friday it expects 90% annual revenue growth in its wireless business, the PCS Group. But the communications giant expects revenue growth will slow to 50% in 2001, and between 30% to 35% in 2002. The company did not release earnings projections for the PCS group.

Sprint is expecting PCS Group revenue growth to slow down over the next two years. Revenue should grow an additional 50% next year, and another 30% to 35% in 2002.

Sprint added that it will need $4.1 billion cash for the full year 2000, and approximately $5 billion in 2001, and plans to finance next year's requirements with a combination of approximately $2 billion in debt and a $3 billion sale of PCS equity.

Worldcom finished up 44 cents, or 2%, at $18; while AT&T closed up 88 cents, or 4%, at $22.44.