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Sprint Writes Off Most of Nextel Equity; Posts $29.5-Billion Loss

6:00 am on February 29, 2008 | Category: Business, Corporate, Telecom Services, Wireless

America’s third biggest mobile phone provider, Sprint Nextel, reported a staggering fourth-quarter loss of $29.5 billion, after writing off most of the remaining value of Nextel Communications, which it acquired in 2005.

This marks the fifth-largest quarterly loss by an S&P 500 company since 1990, and essentially confirmed what investors had failed for months â€“ Sprint’s acquisition of Nextel has turned out to be an unmitigated failure for the combined company.

Shares in Sprint were down 9.6% yesterday after the company warned of continuing subscriber losses this quarter and announced that it would stop paying dividends for the â€œforeseeable future.â€ The stock has lost more than half of its value in the last 12 months.

The $29.7 billion voluntary reevaluation, canceling out the majority of Nextel’s $36 billion value, was coupled with Sprint’s announcement that it had borrowed $2.5 billion under a revolving credit line.

Sprint has been bleeding customers to rivals like AT&T and Verizon Wireless for over two years now as it struggles to integrate the Nextel brand name and products under its own corporate umbrella.

“The fourth-quarter financial results reflect the challenges facing our wireless business,” commented Sprint CEO, Dan Hesse, a former Embarq executive who was appointed to turn the wireless giant around. “We are making significant changes across the organization in an effort to improve execution, stabilize our customer base and deliver on the opportunity provided by our assets.”

“Given current deteriorating business conditions, which are more difficult than what I had expected to encounter, these changes will take time to produce improved operating performance, and our near-term subscriber and financial results will continue to be pressured,” Hesse admitted. “We will have a difficult 2008 as we turn this ship around. This turnaround will not happen for many quarters.”

Sprint suffered a net loss of 683,000 post-paid cell phone customers during the fourth quarter, while average revenue per user (ARPU) declined $2 to $52, and quarterly subscriber churn rose to 2.3%.

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