Sprint Nextel Corp. Series 1 (S) filed Quarterly Report for the period ended 2009-09-30.
Sprint Nextel offers a comprehensive range of wireless and wireline communications services to consumer business and government customers. Sprint Nextel is widely recognized for developing engineering and deploying innovative technologies including two robust wireless networks offering industry leading mobile data services; instant national and international push-to-talk capabilities; and an award-winning and global Tier 1 Internet backbone. Sprint Nextel Corp. Series 1 has a market cap of $8.14 billion; its shares were traded at around $2.83 with and P/S ratio of 0.2.
Highlight of Business Operations:
As discussed below under “Wireless Business—Service Revenue”, the net loss of post-paid subscribers in the first nine months of 2009 can be expected to cause wireless service revenue in the last quarter of 2009 to be approximately $481 million lower and in 2010 to be approximately $1.9 billion lower than it would have been had those subscribers not been lost. If we continue to experience a significant loss of post-paid subscribers in the fourth quarter 2009 and in 2010, it would have a significant negative impact on Sprint’s financial condition, results of operations and liquidity in 2010 and beyond.
Depreciation expense decreased $12 million, or 1%, and $114 million, or 3%, for the three and nine-month periods ended September 30, 2009 compared to the same periods in 2008, primarily due to reduced levels of capital expenditures in 2009 and 2008 compared to prior periods. Amortization expense declined $225 million, or 40%, and $687 million, or 35%, for the three and nine-month periods ended September 30, 2009 as compared to the same periods in 2008, primarily due to the amortization of the customer relationships acquired as part of the Sprint-Nextel merger, which are amortized using the sum of the years’ digits method, resulting in higher amortization rates in early periods that decline over time.
Other, net improved by $32 million and $59 million for the three and nine-month periods ended September 30, 2009 compared to the same periods in 2008. Other, net consists primarily of severance and exit costs, gains from asset dispositions and exchanges and a reduction in expected access costs associated with prior periods. Severance and exit costs increased by $15 million and decreased $12 million for the three and nine-month periods ended September 30, 2009, respectively compared to the same periods in 2008 for the separation of employees and continued organizational realignment initiatives. Gains from asset dispositions and exchanges increased by $19 million for each of the three and nine-month periods ended September 30, 2009 compared to the same periods in 2008 primarily due to a spectrum exchange transaction in the third quarter 2009. A favorable development during the third quarter 2009 relating to disagreements with local exchange carriers resulted in a reduction of $25 million in expected access costs associated with prior periods.
Interest expense increased $24 million, or 7%, and $52 million, or 5%, for the three and nine-month periods ended September 30, 2009 compared to the same periods in 2008. For the three-month period ended September 30, 2009, the interest expense increase as compared to the same period in 2008 is primarily attributed to fewer capital projects resulting in a decrease of capitalized interest. For the nine-month period ended September 30, 2009, the interest expense increase as compared to the same period in 2008 is primarily due to a decrease of $98 million in capitalized interest as a result of fewer capital projects, partially
offset by a decrease of $44 million in interest expense related to the approximate $1.7 billion decline in the average long-term debt balance between the comparative periods. The effective interest rate on the average long-term debt balance of $21.5 billion and $22.8 billion was 6.8% and 6.4% for the three-month periods ended September 30, 2009 and 2008, respectively. The effective interest rate on the average long-term debt balance of $21.5 billion and $23.2 billion was 6.7% and 6.5% for the nine-month periods ended September 30, 2009 and 2008, respectively. See “Liquidity and Capital Resources” for more information on the Company’s financing activities. Interest income decreased $13 million, or 65%, in the three-month period ended September 30, 2009, and $54 million, or 69%, for the nine-month period ended September 30, 2009 as compared to the same periods in 2008, primarily due to lower interest rates.
We recognized net losses of $478 million and $1.5 billion for the three and nine-month periods ended September 30, 2009 compared to $326 million and $1.2 billion for the same periods in 2008. Our three and nine-month period 2009 and 2008 net losses reflect the decreases in Wireless segment revenue due to net losses of subscribers, together with our severance and exit costs, partially offset by the reduction in operating expenses in 2009.
S is in the portfolios of Private Capital of Private Capital Management, Bill Miller of Legg Mason Value Trust, Dodge & Cox, Bill Miller of Legg Mason Value Trust, PRIMECAP Management, Brian Rogers of T Rowe Price Equity Income Fund, Kenneth Fisher of Fisher Asset Management, LLC, Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC.
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