Sprint Nextel's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Sprint Nextel (S)

Q1 2012 Earnings Call

April 25, 2012 8:00 am ET

Executives

Brad Hampton -

Daniel R. Hesse - Chief Executive Officer, President, Director and Chairman of Executive Committee

Steven L. Elfman - President of Network Operations & Wholesale

Joseph J. Euteneuer - Chief Financial Officer

Steven M. Mollenkopf - President and Chief Operating Officer

Analysts

Jonathan Chaplin - Crédit Suisse AG, Research Division

Michael Rollins - Citigroup Inc, Research Division

Kevin Smithen - Macquarie Research

Brett Feldman - Deutsche Bank AG, Research Division

David Michael Dixon - FBR Capital Markets & Co., Research Division

David W. Barden - BofA Merrill Lynch, Research Division

Christopher M. Larsen - Piper Jaffray Companies, Research Division

Jason Armstrong - Goldman Sachs Group Inc., Research Division

Batya Levi - UBS Investment Bank, Research Division

Presentation

Operator

Good morning. My name is Susan, and I will be your conference operator today. At this time, I would like to welcome everyone to the First Quarter 2012 Sprint Earnings Release Conference Call. [Operator Instructions] Mr. Brad Hampton, you may begin your conference.

Brad Hampton

Thank you, Susan. Good morning, everyone, and welcome to Sprint Nextel's First Quarter 2012 Earnings Call. Thanks for joining us this morning and for your interest in Sprint. On today's call, Dan Hesse, our CEO, will discuss operational performance in the quarter. Then Steve Elfman, our President of Network Operations and Wholesale, will provide an update on Network Vision. And finally, our CFO, Joe Euteneuer, will cover financial results. Before we get underway, let me remind you that our release and the presentation slides that accompany this call are both available on the Investor Relations page of the Sprint website.

Slide 2 is our cautionary statement. I do want to point out that in our remarks this morning we will be discussing forward-looking information, which involves a number of risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. We provide a comprehensive list of risk factors in our SEC filings, which I encourage you to review, including our annual report on Form 10-K.

Turning to Slide 3. Throughout our call, we will refer to several non-GAAP metrics. Reconciliations of our non-GAAP performance and liquidity measures to the appropriate GAAP measures for the first quarter can be found on the attachments to our earnings release and also at the end of today's presentation, which are available on our website at www.sprint.com/investors.

Let's move onto earnings per share on Slide 4. Basic and diluted net loss per common share for the first quarter were $0.29 compared to $0.43 in the fourth quarter and $0.15 in the year-ago period. The loss per share in the current period included depreciation of approximately $543 million, a negative $0.18 per share, primarily due to accelerated depreciation related to the expected shutdown of the Nextel platform, of which approximately 9,600 sites are expected to occur by the end of the third quarter of this year. The current period also included a onetime benefit of $170 million or approximately $0.06 per share related to the spectrum hosting contract termination with LightSquared.

We recorded a net tax expense of $37 million in the first quarter. For the full year 2012, we continue to expect our net tax expense to be approximately $150 million to $200 million. I will now turn the call over to Sprint CEO, Dan Hesse.

Daniel R. Hesse

Thank you, Brad, and thank you for joining us this morning and for your interest in Sprint. As I discussed on last quarter's call, 2012 marks the second phase in our company's turnaround effort, investment for future growth while we maintain our focus on our operations and execution of the Network Vision program.

As we will describe this morning, we've made progress against our goals. If you turn to Slide 6, please, I'll recap some of the quarter's highlights before reviewing performance across our 3 key priorities, which are generating cash, improving the customer experience and building the brand.

Adjusted OIBDA of just over $1.2 billion exceeded both our internal projections and Street consensus. The adjusted OIBDA margin of 15.2% represents a sequential improvement of 440 basis points from the fourth quarter. We delivered another successful iPhone quarter. We activated over 1.5 million devices in the quarter with 44% of those being new customers to Sprint, a continuing proof point of the strength of the Sprint brand and the compelling combination of an unsurpassed customer experience with the only truly unlimited data, talk and text plan.

I can also report another record quarter for ARPU rate growth for the Sprint platform postpaid business. Year-over-year, Sprint platform postpaid ARPU grew $4.03, the highest increase on record for any major U.S. wireless company. Today we're announcing our sixth consecutive quarter of over 1 million total net customer additions and our eighth consecutive quarter of positive net additions on our Sprint platform postpaid business. Our 56 million total customers establishes a new all-time Sprint record.

And finally, we made continued progress on the Network Vision deployment. We announced and we're on plan to launch 6 major LTE markets by mid-year.

If you would please turn to Slide 7. I'll organize the balance of my comments around our 3 overarching priorities, which I just mentioned. Let me begin with cash. We improved our liquidity position by generating $138 million of positive free cash flow in the quarter and by completing a $2 billion debt raise. Joe will provide more details on our liquidity and capital structure, and we ended the first quarter with cash, cash equivalents and short-term investments of $7.6 billion, adequate to address our short-term needs.

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