Sprint Nextel swings to Q1 loss

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KANSAS CITY, Mo. -- Sprint Nextel Corp., the nation's third-largest wireless carrier, said Wednesday it swung to a first-quarter loss as investments in operations wiped out modest gains in sales.

For the January-March quarter, the Reston, Va.-based company reported losing $211 million, or 7 cents per share, versus $417 million, or 14 cents per share, a year ago.

Excluding one-time amortization charges, Sprint Nextel said it earned 18 cents per share, well below the 22 cents per share expected by analysts polled by Thomson Financial.

Revenues for the quarter rose slightly to $10.1 billion from $10.07 billion a year ago. Analysts had expected $10.31 billion in sales.

The company reiterated its expectation of annual revenues between $41 billion and $42 billion. Analysts predict sales of $41.4 billion and 2007 earnings of 90 cents per share.

Gary Forsee, the company's chief executive and chairman, said the company spent a lot of money during the quarter trying to alleviate technological and signal problems.

"These increased commitments, along with notably higher device subsidies to drive acquisition and retention, impacted our profitability in the quarter," Forsee said in a release.

Sprint Nextel, which has its operational headquarters in Overland Park, Kan., said it gained a net of 600,000 new wireless subscribers during the quarter, ending at 53.6 million. But it lost 220,000 high-quality customers who pay their bills at the end of the month and typically spend more.

It was the third straight quarter of losing postpaid customers, most of them former Nextel Communication Inc. customers who have been frustrated by poor signal quality and other problems since the company was acquired by Sprint in 2005.

Forsee told analysts during a conference call Wednesday that he believed the company would see its postpaid subscriber numbers begin to climb during the second quarter.

Sprint Nextel has fallen far behind its two largest competitors, AT&T's Cingular and Verizon Wireless, which reported first-quarter customer gains of 1.2 million and 1.7 million, respectively.

The company also was dealt a significant blow in March when AT&T Inc., Verizon Communications Inc. and Qwest Communications International Inc. won a 10-year government contract worth up to $48 billion.

Overall churn, or the measure of subscribers dropping service, was 2.3%, level with the company's fourth quarter but higher than the 2.1% reported during the year-ago quarter.

Goldman Sachs analyst Jason Armstrong wasn't surprised Sprint Nextel had spent so much during the quarter and said he had expected even more quality customer defections.

"But for the stock not to trade down on these results, the company will have to be convincing in its argument of a rebound from here," he said in a research note.

Sprint shares, which have traded in a 52-week range of $15.92 to $25.26, were up 58 cents to $20.59 in midday trading on the New York Stock Exchange.
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