Sprint Corporation (S)

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Sprint Nextel Corporation (S)

Q1 2009 Earnings Call

May 4, 2009 8:00 am ET


Yijing Brentano - Vice President Investor Relations

Dan Hesse – CEO

Bob Brust – CFO

Paget Alves – President, Business Markets Group


Michael Rollins – Citi Investment

Tom Sykes – Barclays Capital

Phil Cusick – Macquarie

David Barden – Bank of America-Merrill Lynch

Simon Flannery - Morgan Stanley

Rick Prentiss – Raymond James

Jason Armstrong – Goldman Sachs

John Hodulik - UBS

Mike McCormack – JP Morgan

Tim Horan – Oppenheimer

Walter Piecyk – Pali Research

Craig Moffett - Sanford Bernstein

Chris Larsen – Piper Jaffray


Yijing Brentano

Thanks for joining Sprint Nextel’s First 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 2008 and when filed our Form 10-Q for the first quarter of 2009.

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 first 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 first quarter. We reported a net loss of $594 million or $0.21 per share which compares with a loss of $505 million and $0.18 per share in the year ago period. Special items in the first quarter totaled $385 million after tax or $0.14 per share.

Amortization expenses net of taxes were $283 million or $0.10 per share. Adjusting for these items, yields and adjusted net income before amortization of $74 million and adjusted earnings per share before amortization of $0.03. This compares to adjusted earnings of $0.04 per share in the first quarter of 2008 and a loss per share of $0.01 in the fourth quarter of 2008.

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

Dan Hesse

Overall Sprint had some positive areas to point to in the first quarter as well as some areas for improvement. Cash flow, ARPU, total subscribers, customer’s service and network performance were all strong points but the impact of the economy in our disproportionately sizeable business segment continues to be a challenge for us.

In spite of the economy Sprint ended the first quarter with an increased cash balance of $4.5 billion. For the first quarter we’re reporting sequentially stable adjusted OIBDA of $1.72 billion and free cash flow this quarter of nearly $800 million from which we recently paid off all of 2009 debt service requirements. Going forward we expect to continue to generate positive free cash flow.

A year ago many questioned the utility and viability of the iDEN network driven largely by the economic difficulties, our iDEN business customers are facing we have continued to lose post-paid revenues on this platform. We are very encouraged by the success of the Boost Unlimited prepaid offer which we launched on the iDEN network in February. It has been a very long time since we’ve reported the number of iDEN network subscribers actually increasing.

The economy has created challenges and it also creates opportunities for those who adapt as necessary. The first quarter of 2009 is the first quarter where we believe that there were as many prepaid as there were post-paid customer decisions in the US. The prepaid share of the market could increase in future quarters. Like prepaid, the wholesale market including devices like the Kindle 2 is another area of growth potential.

If you go to slide seven, in terms of total subscribers Sprint produced it’s best sequential quarter in Sprint Nextel history in both gross add and net add performance, with net adds improving sequentially by over one million and gross adds increasing sequentially by 24%. In post-paid, even though our analysis indicates that in the most recent quarter we had our best sequential improvement in share of gross adds in two years, we were disappointed by the continuing sizeable losses of post-paid customers. We lost 1.25 million post-paid customers in the quarter. We need to do better.

Even though post-paid churn improved by 20 basis points year over year it ticked up slightly from the previous quarter driven primarily by economy driven disconnects from business customers. We continued our focus of putting prime credit customers on our post-paid platform with 84% of our post-paid base being prime.

If you go to slide eight, we continue to make progress improving customer satisfaction. I am pleased to say that we have not achieved 15 consecutive months of unprecedented improvement in two key metrics. First call resolution and customer care satisfaction. During March, the portion of care survey respondents that gave us the highest possible rating on their customer care experience increased by 39% from a year ago.

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