Tuesday, January 15, 2008

Sprint Nextel Corp. is putting its hopes in its $5 billion WiMax Internet network as the Reston company continues to lose mobile wireless customers.

The company, which recently forced out former Chief Executive Officer Gary Foresee and replaced him with Dan Hesse, was the only one of the largest U.S. wireless carriers to end the third quarter with a net loss of wireless subscribers.

Now, another round of subscriber losses is expected for the fourth quarter ended Dec. 31 as the firm tightened credit standards for would-be subscribers and failed to price its handsets competitively, said Philip Cusick, an equity research analyst with Bear Stearns in New York.

Shares of Sprint, which have lost more than 25 percent in the past year, closed up 11 cents yesterday at $12.36.

Citing anonymous sources, the Wall Street Journal yesterday reported that Mr. Hesse plans to fire several thousand workers. The company last year fired 5,000. The Journal also disclosed that Mr. Hesse may relocate the company’s headquarters to Overland Park, Kan., where 13,000 of the company’s 60,000 employees are located.

Sprint, behind AT&T and Verizon in terms of both customers and market cap, “did not match the low prices” of its competitors in December, Mr. Cusick said in a research note, adding that Sprint sells Motorola’s Razr phone for $50 while both AT&T and T-Mobile offer the phone for free, and Verizon sells it for less than $20.

The carrier also stands to be disproportionately hurt amid the nation’s subprime mortgage crisis.

“Along with its host of other problems, Sprint also has the highest proportion of subprime customers in its postpaid base among the wireless carriers,” said Mr. Cusick, whose firm does investment banking for Sprint.

Sprint isn’t alone in its hard times. Shares of AT&T last week fell the most in almost five years after Chief Executive Randall Stephenson said slowed economic growth was responsible for more customers defaulting on their phone and high-speed Internet bills.

“Our outlook for the [telecommunications sector] is broadly cautious, assuming a meaningful level of economic uncertainty continuing throughout most of 2008,” said Christopher King, an analyst with Stifel Nicolaus & Co. Inc., in an annual industry outlook.

Sprint last week reaffirmed its investment in its WiMax high-speed wireless network, known as Xohm. The company said it plans to roll out the network in certain U.S. cities by mid-year.

The stock has lost nearly 11 percent since Mr. Foresee, champion of the WiMax initiative, resigned in early October.


Shares of Reston-based Sprint Nextel Corp. have fallen nearly 50 percent in the last six months as the third-largest U.S. mobile-phone service provider continued to lose customers.




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