Updated from Jan. 8Sprint ( S) tumbled 9% early Tuesday after the struggling wireless giant detailed its latest quarterly subscriber losses and set plans to cut 5,000 jobs. The Reston, Va., telco said it lost 306,000 postpaid subscribers in the quarter ended Dec. 31. The company, which is the sole big wireless operation losing subscribers amid a red-hot streak for the industry, also guided to 2007 revenue at the low end of Wall Street's expectations. Sprint said it would reduce its overall full-time head count by 5,000 from the 2006 year-end level of 64,600, in a bid to streamline its cost structure. Sprint said a lower-margin revenue mix, investment of an additional $1.1 billion in business operations and start-up costs associated with the build-out of a so-called WiMax wireless network "will pressure profitability" in the near term. Shares fell $1.75 to $17.89 early Tuesday. Sprint was downgraded at Credit Suisse, Deutsche Securities and CIBC, while RBC and Prudential cut ratings on wireless rival Alltel ( AT). The news comes after a turbulent year that saw three of Sprint's top executives bail in the aftermath of Sprint's acquisition of Nextel. The departures leave CEO Gary Forsee unchallenged atop the company. Sprint says preliminary sales for the year were $41 billion, which is below the $41.5 billion analysts were looking for, according to Reuters Research. Looking ahead, the company expects 2007 sales to be flat at between $41 billion and $42 billion. Wall Street had been looking for $42 billion in sales this year.
The No. 3 wireless shop has once again had trouble hanging on to its lucrative Nextel subscribers. Even as Verizon's ( VZ) Verizon Wireless and AT&T's ( T) Cingular rack up new customers at a record clip, Sprint lost 306,000 postpaid users in the quarter. On the bright side, Sprint's churn, reflecting its monthly defection rate, improved to 2.3% from 2.4% in the third quarter. And helping to offset direct subscriber losses, Sprint's wholesale partners -- including Boost, Qwest and Virgin Mobile -- added more than a million new users. Integration of the Nextel operations has been difficult for Sprint. Analysts say Nextel's iDEN network has been suffering from high traffic and poor connections. Sprint vows to make improvements in the network and to push more hybrid CDMA-iDEN phones. "Sprint Nextel ended 2006 in a solid financial position," Forsee claims. "We expect our full-year projected financial results will be in line with our prior guidance, and we remain on or ahead of plan in integrating our pre-merger operations, systems and product and service line up. "Over the course of the year we expect to resume growth of the post-paid customer base," he said, "and stabilize these revenues, improve post-paid churn to below 2% and achieve increasing merger synergies." As for cuts, the company says "staff reductions are expected to be applied across the company with a majority of the reductions completed in the first quarter of the year." Looking ahead, the company says sales growth in 2007 will be hit by lower average revenue per user and lower revenue from its conventional wireline business.