Sprint Corporation (S)

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Sprint Nextel Corporation (S)

Q2 2009 Earnings Call

July 29, 2009 8:00 am ET

Executives

Yijing Brentano - Investor Relations

Daniel R. Hesse - President, Chief Executive Officer, Director

Robert H. Brust - Chief Financial Officer

Keith O. Cowan - President of Strategic Planning and Corporate Initiatives

Paget Leonard Alves - President - Sales & Distribution

Danny Bowman - President, Sprint Nextel iDEN

Steven L. Elfman - President - Network Operations and Wholesale

Robert H. Johnson - President of CDMA Business Unit

Analysts

John Hodulik - UBS

Phil Cusick - MacQuarrie Research Equities

David Barden - Banc of America

Simon Flannery - Morgan Stanley

Michael Rollins - Citigroup

Jason Armstrong - Goldman Sachs

David Dixon - Friedman Billings Ramsey

Craig Moffett - Sanford C. Bernstein

Timothy Horan - Oppenheimer

Christopher Larsen - Piper Jaffray

Walter Piecyk - Pali Research

Presentation

Operator

Yijing Brentano

Good morning and thanks for joining Sprint Nextel’s second quarter earnings call. Dan Hesse, our CEO, will discuss operational performance and notable events in the quarter, and then our CFO Bob Burst will cover the financial aspects of the quarter.

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 2 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-Q for the first quarter of 2009 and when filed, our Form 10-Q for the second quarter of 2009.

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

Beginning this quarter, we are no longer providing adjusted net income or loss or adjusted earnings or loss per share values. Table 5 now provides you with selected items net of taxes for your analysis. Basic and diluted loss per common share for the quarter was $0.13, compared to $0.21 in the first quarter 2009 and $0.12 in the year ago period.

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

Daniel R. Hesse

Thank you, Yijing. Good morning, everyone and thanks for joining us and for your interest in Sprint. As I prepared my comments for this earnings call, one observation was clear -- Sprint is not the same company it was 12 months ago. During prior quarters, our focus on operating improvements and efficiencies enabled Sprint to stabilize our earnings trend and during the second quarter, we saw a sequential improvement in adjusted OIBDA. We continued to generate strong free cash flow during the quarter, resulting in a cumulative free cash flow production of almost $1.5 billion during the first half of 2009. We ended the quarter with $4.6 billion of cash. We have paid the portion of our long-term debt maturities due in 2009 during the second quarter and we now have more than enough cash on hand to pay our scheduled debt maturities through the end of 2011.

Improving the customer experience is our top priority so my favorite statistic of the second quarter is that we have now achieved 18 consecutive months of improvement in customer satisfaction metrics for customer care and first call resolution.

Another area that makes an important contribution to the customer experience is network performance. Our networks are performing at best ever levels and based upon a recent 13-city 3G performance test, our network performance was recognized by PC world as being more reliable than Verizon and AT&T.

The results of PC World’s comparative testing clearly demonstrated that Sprint continues to have the most dependable 3G network among U.S. carriers.

We also saw momentum in our brand perception metrics. Sprint's Now Network campaign recently won the prestigious Cannes Gold Lion Award, which is the Oscar of the advertising world, from more than 2,000 campaign entries and over 200 finalists worldwide.

Sprint also won four silver lions and a bronze lion, the only brand to win multiple awards within a category.

Our successful launch of the Palm Pre, perhaps the smoothest and best executed new device launch in our history, has set the stage for post-paid customers to discover the new Sprint. Meanwhile, our successful Boost Unlimited offer continued to attract new customers, with Sprint's corporate brand pillars of simplicity and value.

Boost Unlimited provided us with another strong quarter of prepaid growth, generating the highest quarterly prepaid net adds in our history.

We have been so impressed with the potential of the prepaid market in the U.S. that we are doubling down on wireless by yesterday’s announced acquisition of Virgin Mobile U.S.A. This acquisition will strengthen our position in the prepaid market, giving us two great brands, more operational efficiency, and additional management talent. Dan Schulman is a proven winner with exceptional industry credentials and he adds to the strong list of experienced leaders who have joined Sprint as we endeavor to build a truly world class leadership team.

Slide 6 highlights some of the underlying trends and metrics for the quarter. Our postpaid ARPU continued to remain stable for the sixth consecutive quarter at $56. The data portion of our postpaid ARPU grew to more than $15.50, while the postpaid CDMA data ARPU now exceeds $18.50.

Second quarter postpaid churn dropped sequentially by 20 basis points to 2.05%. The growth we have experienced in smartphone and touch devices, the ongoing adoption of our everything plan, and the continued reduction in customer credits were tailwinds in the quarter.

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