- The Washington Times - Friday, February 29, 2008

Sprint Nextel Corp. yesterday announced a staggering $29.5 billion loss, canceled its dividend and introduced a low-cost pricing plan to regain some of the nearly 700,000 customers who abandoned the struggling wireless company in the latest quarter.

Sprint Nextel’s “Simply Everything” plan offers unlimited U.S. calling, texting, push-to-talk and data services for a flat monthly rate of $99.99. The plan undercuts similarly priced packages from competitors Verizon Wireless Inc.’s and AT&T; Inc.’s unlimited domestic calling, while T-Mobile USA Inc. has a $99.99 call-and-text plan. Sprint Nextel said it will offer an unlimited calling rate of $89.99.

The third-largest U.S. wireless carrier yesterday wrote off the entire value of Nextel Communications Inc., underscoring the challenges that have dogged the company since Sprint acquired Nextel in 2005, including reports of poor customer service and a less-than-smooth integration of the two companies’ work forces.

Chief Executive Officer Dan Hesse yesterday admitted the company “is not performing well right now.”

“We are working aggressively to turn this around but our financial performance will not improve overnight,” said Mr. Hesse, who took over the troubled company in December.

Sprint Nextel, which is based in Overland Park, Kan., but maintains a large office in Reston, shed 683,000 contract customers in the fourth quarter. Its prepaid phone service, Boost Mobile, added subscribers, bringing the company’s net loss for the quarter to 108,000 customers.

Sprint Nextel ended the quarter with 53.8 million total subscribers compared with 70.1 million for No. 1 AT&T; Inc. and 66 million for No. 2 Verizon.

The company’s fourth-quarter loss of $29.5 billion ($10.36 per diluted share) compared with a gain of $261 million (9 cents) a year ago.

The dismal financial results, along with the company’s prediction it will lose 1.2 million contract subscribers in the first quarter, sent Sprint shares plunging 10 percent to $8.09.

Mr. Hesse yesterday described the company as “a once strong brand which lacks relevance and a clear message. This will change.”

The company is focused on improving customer service and making Sprint its umbrella brand, he said.

In the meantime, the company will stop paying dividends and will tap a revolving line of credit.

Many analysts trace the firm’s current problems to its merger with Nextel.

“I think Nextel was a quite different company, almost a cult,” said Christopher C. King, an analyst with Stifel, Nicolaus & Co. Inc. “Sprint bought it and tried to essentially ram its culture down Nextel’s throat and tried to go a long way, I think, in eliminating the brand name altogether.”

Mr. King said the company’s conflicting branding messages confused consumers and resulted in a “disjointed marketing strategy.” As for the new pricing plan, “I do think it’s a pricing plan that Sprint will be able to market profitably, but I’m not necessarily sure it’s enough given the reputation they have today that it’s going to cause any dramatic shifts to the overall marketplace.”

Jan Dawson, an analyst with market research firm Ovum PLC, said the news “should prevent Sprint customers from jumping ship for a $99 plan from one of its competitors, and it proves that Dan Hesse means business and is willing to take bold steps to turn Sprint around. But there’s a heck of a lot still to do there.”

Sprint Nextel recently moved its headquarters to Kansas, where it has 13,000 employees, from its 4,000-person office in Reston.

Sprint spokesman Rich Pesce said no layoffs are planned at this time.

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