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Sprint Nextel (S) Gains After Narrower-Than-Expected Q1 Loss

 April 25, 2012 09:36 AM

(By Balaseshan S) Sprint Nextel Corp. (NYSE:S) reported a wider first-quarter loss, primarily due to accelerated depreciation related to the expected shut down of the Nextel platform and a one-time benefit related to the spectrum hosting contract termination with LightSquared. However, loss was narrower than Street's expectations, sending its shares up 6.07%.

Loss for the first quarter widened to $863 million or $0.29 per share from $439 million or $0.15 per share last year.

Operating revenue increased to $8.73 billion from $8.31 billion, primarily due to higher wireless service revenue. Analysts had expected a loss of $0.41 per share on revenue of $8.71 billion.

[Related -Big Prints in Sprint Put Options]

Wireless revenue increased to $7.95 billion from $7.41 billion, primarily due to higher postpaid average revenue per user (ARPU) as well as an increased number of net prepaid subscribers due to continued growth of Assurance Wireless and Virgin Mobile Beyond Talk customers, partially offset by lower prepaid ARPU.

The company reported total net subscriber additions of nearly 1.1 million during the first quarter, bringing total ending subscribers to a record 56 million.

The total number of customers on the Sprint platform grew almost 4% sequentially including 263,000 postpaid net subscriber additions, 870,000 prepaid net subscriber additions and 785,000 wholesale and affiliate net subscriber additions.

Sprint recorded more than 1.5 million iPhone sales in the first quarter with 44% going to new customers. Prepaid churn on the Sprint platform improved to 2.92%, the tenth consecutive quarter of year-over-year improvement.

[Related -Sprint Corporation (S): Sprinting To $10?]

Wireline revenue fell to $998 million from $1.12 billion, primarily as a result of an intercompany rate reduction based on current market prices for voice and IP services sold to the wireless segment as well as the scheduled migration of wholesale cable VoIP customers off of Sprint's IP platform.

Adjusted operating income before depreciation and amortization (OIBDA) fell 20% to $1.21 billion, primarily due to higher equipment net subsidy, higher wireless cost of service and lower wireline revenues, partially offset by higher postpaid and prepaid wireless service revenues. Adjusted OIBDA margin declined to 15.2% from 19.9%.

Looking ahead into the fiscal 2012, the company anticipates adjusted OIBDA to be at the high-end of the previous forecast of $3.7 billion to $3.9 billion.

Within that Adjusted OIBDA expectation, the company continues to expect full year consolidated net service revenue growth of 4% to 6% (consolidated revenue less wireless equipment revenue). Sprint still projects capital expenditures of about $6 billion in 2012, excluding capitalized interest.

S is trading up 6.07% at $2.62 on Wednesday. The stock has been trading between $2.10 and $6.45 for the past 52 weeks.

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