Sprint Nextel, the third largest US mobile phone company, reported a $29.5bn fourth-quarter net loss after writing down most of the remaining value of its 2005 purchase of Nextel Communications.
The loss is the fifth largest for a company in the Standard & Poor’s 500 index since 1990.
Shares in Kansas-based Sprint, which also warned that subscriber losses would deepen in the current quarter and said the turnround would take longer than expected, fell by 9.6 per cent after the group said it would stop paying dividends for the “foreseeable future”. The stock has fallen more than 51 per cent in the past year.
Sprint, which warned at the end of last month that it might take a goodwill impairment charge of up to $31bn, also revealed that it had borrowed $2.5bn under a revolving credit line, in part to mitigate financing risk related to maturing debt securities but it said it believed it was still in compliance with debt covenants.
The $29.7bn fourth-quarter goodwill impairment charge means Sprint has written off nearly all of Nextel’s value following its acquisition for $36bn three years ago. Sprint has been struggling with the integration and has been losing ground to both AT&T Mobile and Verizon Wireless, its larger rivals. It also recorded a further $279m in other charges.
“The fourth-quarter financial results reflect the challenges facing our wireless business,” said Dan Hesse, Sprint’s recently appointed chief executive. “We are making significant changes across the organisation in an effort to improve execution, stabilise our customer base and deliver on the opportunity provided by our assets.”
But Mr Hesse cautioned that “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”.
On a conference call with analysts, Mr Hesse added: “We will have a difficult 2008 as we turn this ship around. This turnaround will not happen for many quarters.”
The company, which lost 683,000 post-paid monthly contract customers during the fourth quarter, said it now expects to lose 1.2m customers. Average revenues per subscriber fell by $2 to $58 while churn rate, a key measure of customer loyalty, were high at 2.3 per cent.
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