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Huge Writedown Whacks Sprint Nextel

Shares are plunging after it posts a fourth-quarter loss of $29.5 billion.

Updated from 8:49 a.m. EST

Sprint Nextel

(S) - Get SENTINELONE, INC. Report

swung to a fourth-quarter loss Thursday after a massive writedown, sending its shares down more than 10%.

The phone-service provider posted a fourth-quarter loss of $29.5 billion, or $10.36 a share, compared with earnings of $261 million, or 29 cents a share, from a year ago. The hefty loss came after the company wrote down much of the remaining value of its acquisition of Nextel from 2005.

Excluding amortization costs totaling $29.7 billion, Sprint would have earned 21 cents a share during the quarter, topping Wall Street's estimate of 18 cents a share.

However, Sprint said net operating revenue declined to 6% from a year ago to $9.8 billion as the company failed to stem customer attrition. Analysts forecast revenue of $9.9 billion, according to Thomson First Call. The stock was recently down 96 cents to $7.99.

Sprint also canceled its 10-cent-a-year dividend "for the foreseeable future" and discontinued its stock buyback. The Overland Park, Kan., company said it will borrow $2.5 billion from a revolving credit facility due to instability in the capital markets.

"The issues we face are more difficult than what I expected to find," said CEO Dan Hesse, who took over the position late last year, during the company's conference call. "We will have a difficult 2008 as we turn this ship around. This turnaround will not happen for many quarters."

That being the case, Fitch Ratings downgraded Sprint's issuer-default rating to BB+, the highest junk rating, from BBB-. Standard & Poor's said it placed the company's BBB- long-term corporate rating on watch, indicating it may cut that rating to junk.

Wireless revenue fell 6% from the same period a year ago to $8.5 billion, while wireline revenue dropped 1% to $1.6 billion. Sprint said that the number of wireless subscribers dropped by 108,000 in the quarter due to declines in post-paid integrated Digital Enhanced Network, or iDEN, users and pre-paid Boost mobile users.

"We are taking the customer defection issue very seriously, and we're addressing it," said Hesse. "Because we have not provided the right experience, customers are leaving us."

He said that owing to "deteriorating business conditions," the company's planned changes "will take time to produce improved operating performance, and our near-term subscriber and financial results will continue to be pressured."

In January, Sprint said it was reducing its work force by 4,000 positions and would pare its third-party distribution points in an effort to trim more than $700 million from annual costs.

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Also during the earnings conference call, Hesse unveiled a new unlimited voice, messing and data plan called "Simply Everything," priced at $99.99 a month. The announcement comes a week after rivals

Verizon

(VZ) - Get Verizon Communications Inc. Report

,

AT&T

(T) - Get AT&T Inc. Report

and

T-Mobile

launched their own packages at that same price.

Previously, some analysts said they expected

Sprint would forced to drop its existing unlimited wireless plan nearly 40% below the price level of its competitors.

Rival Verizon gained 2.5% to $37.31, and AT&T was recently up 2% to $35.90.

Qwest Communications

(Q)

, which may

abandon Sprint and partner with Verizon for wireless services, was rising 1.1% to $5.68.