Sprint Corporation (S)

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Sprint Nextel Corporation (S)

Q4 2008 Earnings Call

February 19, 2009 8:00 am ET

Executives

Yijing Brentano - Vice President Investor Relations

Dan Hesse – CEO

Bob Brust – CFO

Keith Cowan - President, Strategy and Corporate Development, Acting President, CDMA Business Unit

Danny Bowman - President iDEN

Analysts

David Barden – Bank of America Securities

Phil Cusick – Macquarie Research Equities

Michael Rollins – Citi Investment Research

Simon Flannery - Morgan Stanley

John Hodulik - UBS

Rick Prentiss – Raymond James

Craig Moffett - Sanford Bernstein

Jason Armstrong – Goldman Sachs

Mike McCormack – JP Morgan

Walter Piecyk – Pali Research

Presentation

Operator

(Operator Instructions) I would like to welcome everyone to the Fourth Quarter Sprint Nextel Earnings Call. I would now like to turn the call over to Yijing Brentano, Vice President of Investor Relations.

Yijing Brentano

Thanks for joining Sprint Nextel’s Fourth Quarter Earnings Call. For the format of the call Dan Hesse our CEO will discuss operational performance and notable events in the quarter, then our CFO, Bob Brust will cover financial results. After Bob’s comments Dan will provide a few closing remarks. We will then open it up for questions.

Before we get underway let me remind you that our release and the presentation slides that accompany this call are both available on the investor relations page of the Sprint website. Slide two is our cautionary statement. I want to point out that in our remarks this morning we will be discussing forward looking information which involves a number of risks and uncertainties that may cause actual results to differ materially from our forward looking statements.

We provide a comprehensive list of risk factors in our SEC filings which I encourage you to review, including our Form 10-K for the year ended 2007 and when filed our Form 10-K for the year ended 2008.

Turning to slide three, throughout our call we will refer to several non-GAAP metrics. Reconciliation of our non-GAAP performance and liquidity measures to the appropriate GAAP measures for the fourth quarter can be found on the attachments to our earnings release and also at the end of today’s presentation which are stored on our website at www.Sprint.com.

On slide four we provide the normalization of net income and earnings per share for the fourth quarter. We reported a net loss of $1.6 billion or $0.57 per share which compares with a loss of $29 billion or $10.31 per share in the year ago period. The company recorded a non-cash goodwill impairment charge of approximately $1 billion in the fourth quarter. The goodwill charge and other special items in the fourth quarter totaled $1.3 billion after tax or $0.46 per share.

Amortization expenses net of taxes were $295 million or $0.10 per share. Adjusting for these items yields and adjusted net loss before amortization of $19 million and adjusted loss per share before amortization of $0.01. This compares to adjusted earnings of $0.23 per share in the fourth quarter of 2007 and $0.00 per share in the third quarter of 2008.

I will now turn the call over to Sprint’s CEO, Dan Hesse

Dan Hesse

As I have on previous earnings calls I will be discussing our focus on our top three priorities; improving the customer experience, strengthening the brand and enhancing profitability. Throughout 2008 we made progress on these priorities and we are operating better entering 2009 but we have yet to turn the corner and we are far from satisfied with our performance.

In the fourth quarter we delivered subscriber and financial results that met the outlook we provided. We generated free cash flow in excess of $500 million, we retired $1 billion in debt and we ended the quarter with $3.7 billion of cash in the bank, enough to meet our debt service requirements at least through the end of 2010. Additionally, we completed the Clearwire transaction and launched the first dual mode 3G/4G device in Baltimore.

During a challenging economic climate, so far we have seen some but minor financial impacts from the adverse economic conditions. We expect wireless communications to demonstrate greater resiliency then many other industries. As one of the largest providers of wireless to business we have experienced the impact of business customers downsizing.

In spite of Sprint’s high percentage of business customers, Sprint is nevertheless the only major carrier that achieved year over year post paid churn rate improvement in the fourth quarter and also is the only carrier that showed sequential albeit modest net add improvement in the quarter.

While the current economy presents challenges, it also presents opportunity as consumers are increasingly looking for greater value and a more predictable monthly bill. Sprint is well positioned with our focus on value, simplicity and productivity.

For our post paid customers we have an established portfolio of Everything plans including Simply Everything. Simply Everything is the ultimate in simplicity with unlimited data, text and voice. Simply Everything continues to sell well and customer churn and lifetime value have exceeded our expectations. More customers are buying up to Simply Everything then are buying down.

We relied on our brand attributes of value and simplicity once again in creating the National Boost Monthly Unlimited offer for the prepaid segment which we launched a few short weeks ago on our iDEN network. We are excited about our 2009 initiatives especially our upcoming exclusive launch of the Palm Pre device. Sprint also expects to launch additional dual mode 4G devices, services, and markets during 2009.We will continue to pursue opportunities for growth in the wholesale space by providing network services to innovative devices such as the new Amazon Kindle 2.

Read the rest of this transcript for free on seekingalpha.com