Sprint Corporation (S)

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Sprint Nextel (S)

Q4 2010 Earnings Call

February 10, 2011 8:00 am ET

Executives

Steven Elfman - President of Network Operations and Wholesale

Robert Brust - Chief Financial Officer

Daniel Hesse - Chief Executive Officer, President, Director and Chairman of Executive Committee

Yijing Brentano - Vice President Investor Relations

Analysts

Christopher Larsen - Piper Jaffray Companies

John Hodulik - UBS Investment Bank

Philip Cusick - JP Morgan Chase & Co

Jonathan Chaplin - Crédit Suisse AG

Timothy Horan - Oppenheimer & Co. Inc.

Simon Flannery - Morgan Stanley

Michael Rollins - Citigroup Inc

David Barden

Brett Feldman - Deutsche Bank AG

Jason Armstrong - Goldman Sachs Group Inc.

Michael McCormack

Presentation

Operator

Good morning. My name is Rishaira, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sprint Nextel Fourth Quarter Earnings Conference Call. [Operator Instructions] And now I'd like to turn the call over to Ms. Yijing Brentano, Vice President of Investor Relations. Ma'am, you may begin.

Yijing Brentano

Thank you, Rishaira. Good morning, and welcome to Sprint Nextel's fourth quarter 2010 earnings call. Thanks for joining us this morning.

For the format of the call, Dan Hesse, our CEO, will discuss operational performance in the quarter; and then our CFO, Bob Brust, will cover the financial aspects of the quarter. Bob is joining us remotely today due to family reasons. Before we get underway, let me remind you that our release and the presentation slides that accompany this call are both available on the Investors 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 Part I Item 1A Risk Factors of our annual report on Form 10-K, Part II Item 1A quarterly reports on Form 10-Q and when filed, Part I Item 1A of our Form 10-K for 2010.

Turning to Slide 3. 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 fourth quarter can be found on the attachments to our earnings release and also at the end of today's presentation which are available on our website at www.sprint.com/investors.

Next, I would like to cover our EPS results. Basic and diluted loss per common share for the fourth quarter were $0.31 compared to $0.30 in the third quarter 2010 and $0.34 in the year-ago period. Net tax expense for the full year 2010 was $166 million. In the fourth quarter, we reported a net tax benefit of $5 million, primarily due to resolution of state tax matters, which caused our full year tax expense to be lower than we have projected at the end of third quarter. We expect that for the full year 2011, we will record a net tax expense of approximately 10% to 12% on pretax loss. I will now turn the call over to Sprint's CEO, Dan Hesse.

Daniel Hesse

Thank you, Yijing, and thank you for joining us this morning. The momentum Sprint has been showing in recent quarters continued in the fourth quarter, and Q4 represents a good way to cap our turnaround efforts throughout 2010.

Sprint's three key priorities have remained unchanged for three years. Number one, the customer experience is the foundation of building; number two, a strong brand, which leads to attracting and retaining customers; fundamental three, improving our cash position.

At the beginning of 2008, I told you on my first call at Sprint that the turnaround would not be quick and that there were no magic bullets. I'm not declaring mission accomplished yet far from it. We are not even close to reaching what I think Sprint is capable of, but as I'll describe, our progress has been significant and we're on the right track.

Let me begin with the customer experience on Slide 4. Bob Johnson and his team have completed their first three years of our journey with their 12th consecutive quarter of improved satisfaction with customer care and First Call Resolution, according to the Advanis survey. Both numbers achieved all-time best results. Our top box and bottom box satisfaction scores were also best ever. This progress was corroborated by Vocalabs, independent survey that was completed three weeks ago, where Sprint move into first place in the industry for both overall call satisfaction and First Call Resolution in the fourth quarter from last place just one year earlier. In the recently released J.D. Power survey, Sprint was the only carrier to show a double-digit improvement in their care customer satisfaction score over the past year. In consumer reports, Sprint was the only major carrier to improve in each of the past two years, so much so that we moved from last place two years ago into a statistical tie for first as the best overall choice. In calls to care per customer declined 10% from last year, reaching both an all-time best and achieving industry best in class.

Please turn to Slide 5. A leading independent survey rated customer satisfaction with Sprint's data service best in the industry in November and in December. In the same independent source rated customer satisfaction with Sprint's CDMA and iDEN networks both best ever. In addition, our CDMA and iDEN networks both achieved best-ever results for blocked calls. As a result, our fourth quarter postpaid churn was our best fourth quarter ever, contributing to our best-ever annual churn performance. Fourth quarter prepaid churn results represent our best quarter in five years, and our prepaid annual churn was at its lowest level in five years.

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