Sprint reports $1.7 bil. profit

Amy Shafer

Tuesday, April 22, 2003 | 9:53 a.m.

KANSAS CITY, Mo. -- Sprint Corp. reported first-quarter earnings of $1.7 billion on Monday, but failed to meet analysts' expectations.

Sprint FON, the Overland Park, Kan.-based company's wireline division, reported earnings of $1.85 billion, or $2.06 per share during the quarter that ended March 31, up from $286 million, or 32 cents per share, during the same period a year earlier. Sprint FON reported operating revenue of $3.58 billion, down from $3.9 billion the year before.

Excluding one-time charges, which included the proceeds from the $2.2 billion sale of the company's directory-publishing business, Sprint FON made 34 cents per share, a penny less than the consensus estimate of 35 cents per share among analysts surveyed by Thomson First Call.

The company's wireless division, Sprint PCS, recorded a loss of $182 million, or 18 cents per share, during the first quarter, compared with a loss of $146 million, or 15 cents per share, in 2002.

Excluding one-time charges, PCS lost 16 cents per share. Analysts had predicted a loss of 13 cents per share.

Sprint PCS reported revenue of $2.95 billion, up from $2.84 billion in the first quarter of 2002. Sprint PCS' "churn" rate, or customer turnover, improved to 3.1 percent.

Gary D. Forsee, Sprint's new chief executive, said the company faced "a sluggish economy and heightened competition" during the quarter.

"In this challenging environment, each of our businesses performed admirably," Forsee said.

Results were released after the market closed Monday. Shares of Sprint FON closed up 22 cents at $11.27 on the New York Stock Exchange, but dropped 63 cents in after hours trading. Shares of PCS closed down 2 cents at $4.46, then dropped an additional 34 cents in the extended session.

David Willis, a telecom analyst with the Meta Group, said the results were "really disappointing."

"It just illustrates how difficult it is to be a telco now. There's too many companies in the market," Willis said.

One bright spot was that Sprint said it reduced its debt by $1.6 billion during the quarter to $19.1 billion.

"They've got cash and they're paying down debt, but they're just not prospering," Willis said.

Sprint updated its financial outlook for the full year, saying the FON group expects earnings between $1.30 and $1.35 per share. The company said the estimate includes increased pension and retiree benefits costs, which are expected to trim earnings by 10 cents per share. Revenue is expected to decline between 6 percent and 7 percent.

The company expects PCS to record a full-year loss of 45 cents to 50 cents per share. Gross customer additions are targeted to be in the low- to mid-6 million range.

In a conference call with investors and analysts, Forsee, who was named CEO last month, said he planned to fill two prominent roles -- president of the global markets group and a chief information officer -- before the company's shareholder meeting on May 13.

Forsee also tried to ease concerns about an arbitrator's ruling that allowed him to come to Sprint from Atlanta-based BellSouth Corp. The decision imposed restrictions on Forsee, the most severe of which bans him from any discussions about potential mergers, acquisitions or asset sales for one year.

"The company has put in place a process that keeps us on top of events and changes in the industry structure that could occur over time and determine if and when and under what circumstances Sprint would choose to participate in those events," Forsee said.

Forsee also said the company would continue to evaluate whether to recombine its two tracking stocks, FON and PCS. Sprint has said a recombination is likely at some point.