Intellectual Property Law

Sprint Hits the Growth Skids...4,000 Jobs Cut

By Cynthia Brumfield

The weakest of the U.S. mobile carriers, Sprint-Nextel, reported Q4 07 wireless subscriber tallies this morning and annnounced that it will slash 4,000 internal positions and cut back on contracts in the face of what it expects will be continued downward pressure on customer, revenue and profitability growth.

The troubled carrier stands in contrast to its bigger peers, AT&T and Verizon Wireless, both of which continued to experience mobile customer and revenue growth during Q3 07 and, based on recent executive presentations to investor conferences, will report continued growth in this segment when they release their Q4 07 numbers. During Q4 07, Sprint posted gains in its wholesale and affiliate channels, but suffered big losses in the direct-to-consumer prepaid and postpaid businesses.

During Q4 07, Sprint lost 683,000 postpaid customers -- consumers who typically belong to contract plans -- over two times as many postpaid customers as it lost in Q3 07. Sprint lost 202,000 prepaid customers (those who typically pay upfront and then make calls until the balance drops to zero) during Q4 07, in contrast to a gain of 67,000 prepaid customers during Q3 07.

The upshot: Sprint's total customer base slipped for the second quarter in a row, dipping from 53.96 million to 53.98 million by the end of Q4 07.

Sprint also expects to eliminate more than 4,000 third-party distribution points and to shutter around 125, or 8%, of its company-owned stores. Sprint expects the staff reductions and distribution and store closures to save around $700 million to $800 million during 2008.

However, this unpleasant little announcement is not the end of the bad news for Sprint. The company warns that it will have a "non-cash impairment charge" when it finally releases its Q4 07 earnings report on February 28 due to a write-down in goodwill. The write-down will mostly reflect the loss of market value as a result of Sprint's declining stock value.

Even though Sprint has woes with roots in mismanagement and bad luck, rather than the poor economy, I suspect this is the beginning of a very rocky quarter for the country's telecommunications companies. I would wager that the top Internet, and media companies (in particular, the big media companies such as Time Warner, Viacom and News Corp., hit by the double-whammy of the recession combined with the WGA strike) won't be the bearers of much better news.

Full post as published by IP Democracy on January 18, 2008 (boomark / email).