Sprint in satellite TV deal, profit off

Tuesday, Feb. 3, 2004 | 10:54 a.m.

SUN STAFF AND WIRE REPORTS

Sprint Corp., the dominant local telephone service provider in the Las Vegas Valley, today reported a 2.6 percent decline in fourth-quarter net income on higher expenses at its wireless-phone unit.

Net income for the third-biggest U.S. long-distance telephone company slipped to $38 million from $39 million a year earlier. Sales rose 2.1 percent to $6.68 billion from $6.54 billion, driven by wireless growth, Sprint said in a statement.

Sprint has about 1,700 Las Vegas-area employees. While the company will not release the number of Las Vegas customers, it has about 900,000 local access lines.

That number, however, is down from 1 million access lines in 2000. Sprint has blamed the drop in lines on lower demand for second phone lines for Internet amid a rise in broadband connections. It also has lost lines due to the increase in customers dropping landlines completely for wireless service.

Sprint also is facing increased competition in Las Vegas for local phone service with an announcement last week that SBC Communications has finally launched service here. San Antonio-based SBC is the main local telephone company in Reno.

Cox Communications, the main cable television provider in Las Vegas, also has discussed plans to eventually roll out local phone service here.

Lou Emmert, general manager in charge of Sprint's Las Vegas-area operations, said the company will continue to defend its market share. The latest move in that effort comes with an announcement this morning that it will partner with Littleton, Colo.-based EchoStar Communications to provide DISH Network satellite cable television service to Las Vegas customers.

While service will be provided by Echostar, it can be bundled for Sprint customers on a single bill with landline and wireless telephone service and DSL Internet access.

"(Las Vegas) has a lot of competition," Emmert said. "We are constantly seeing new competition coming into the market. By providing bundles, we think we have all the bases covered."

Contributing to the flat earnings report, Sprint scrapped development of a billing system at the PCS mobile-phone group, leading to pretax expenses of $352 million in the quarter. Still, an 8.4 percent increase in wireless sales cushioned the effect of a 12th straight decline in sales at the long-distance unit, which faces new competition from local carriers such as BellSouth Corp. entering the market.

"They're doing a good job at doing what they have to do: Taking costs out of the business," said Kurt Funderburg, an analyst at Oakmark Funds whose parent, Harris Associates LP, owns 21.7 million Sprint shares. "The telecom business on all fronts remains tough."

Shares that track Sprint's main long-distance and local- phone business slipped 9 cents to $17.91 at 9:39 a.m. in New York Stock Exchange composite trading. Shares that track the performance of the wireless unit fell 11 cents to $8.13.

Chief Executive Officer Gary Forsee, who took the helm in March, is trying to reduce costs to cope with sluggish sales. That helped boost fourth-quarter earnings at Sprint's local and long-distance unit 22 percent to $360 million, or 40 cents a share, from $294 million, or 33 cents, a year earlier. Revenue at the unit, known as FON, fell 3.6 percent to $3.54 billion.

Operating expenses fell 1.6 percent at the local-phone business and fell 8.7 percent at the long-distance operation.

The loss at the wireless unit widened to $322 million, or 31 cents a share, from $255 million, or 25 cents, a year earlier. Sales rose to $3.31 billion from $3.05 billion. Operating expenses at PCS rose 13 percent to $3.43 billion, largely because of the billing-system impairment expense.

In a bid to save $1 billion annually, Forsee is organizing Sprint into two groups based on customers -- one corporate and the other consumer -- instead of organizing around products.

Sprint also plans to move thousands of jobs, primarily in the wireless division, to International Business Machines Corp. to save money, the Wall Street Journal reported earlier today, citing unnamed people. The step, to be announced this week, will save Sprint as much as $3 billion over several years and will give IBM about the same amount in revenue, the newspaper said.