RESTON, Va. - Sprint Nextel Corp. reported Monday that its cell phone business suffered a net loss of 300,000 monthly subscribers in the fourth quarter and that the struggling wireless company will cut 5,000 jobs.
The company's stock plunged more than 8 percent after the financial update, which included a 2007 outlook shy of many Wall Street forecasts.
Sprint said it expects its 2006 results to be in line with its previous guidance, with full-year revenue of $41 billion to $41.5 billion and adjusted operating income before depreciation and amortization of $12.6 billion to $12.9 billion. On average, analysts surveyed by Thomson Financial are forecasting 2006 earnings of $1.26 per share on sales of $41.53 billion.
For 2007, the company now expects operating revenue of $41 billion to $42 billion in 2007. Analysts are looking for earnings of $1.32 per share on sales of $42.04 billion.
During the fourth quarter, Sprint added 742,000 net subscribers, ending the year with a customer base of 53.1 million. Those numbers include wholesale subscribers to other brands of cell phone service carried over the Sprint network such as Virgin Mobile.
The fourth quarter net additions included 876,000 from both wholesalers and affiliate companies that sell Sprint Nextel services, as well as 171,000 new customers for Boost, a wholly owned subsidiary geared toward younger consumers.
Offsetting the gains, however, was a net decline of 306,000 direct subscribers driven by a continuing exodus of Nextel subscribers amid frustration over worsening service quality. The Sprint brand subscriber base grew during the quarter, but not enough to offset the Nextel drop.
The first quarter will see a continuation of the net decline in Sprint and Nextel customers, but the trend will turn positive for the second quarter and the full year, management said in a conference call, asserting that investments in adding caller capacity to the Nextel network began paying off in late 2006.
"We started to see positive indications in the fourth quarter," said Chairman and Chief Executive Gary Forsee said in an interview, noting that blocked calls on the Nextel network were at the lowest level ever.
The planned job cuts, most of them expected in the first quarter, will reduce the size of Sprint's work force to just below 60,000 positions. The cuts are expected to be applied across the company's operations.
Sprint Nextel also said it expects to incur about $700 million in merger integration and severance costs in 2007, the bulk of them coming in the first half of the year.
"Our plans for 2007 have a growth story, but that growth story won't happen until the second half of the year," Forsee said.
The update came after the close of Monday's regular stock session. Sprint's shares slid $1.64 to $18 in extended trading after rising 43 cents, or 2.2 percent, to close at $19.64 on the New York Stock Exchange.