Sprint Corporation (S)

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Sprint Nextel Corporation (S)

Q3 2010 Earnings Call Transcript

October 27, 2010 8:00 am ET

Executives

Yijing Brentano – VP, IR

Dan Hesse – CEO

Bob Brust – CFO

Bob Azzi – SVP, Network

Analysts

John Hodulik – UBS

Michael Rollins – Citi

David Barden – BofA-Merrill Lynch

Jason Armstrong – Goldman Sachs

Brett Feldman – Deutsche Bank Securities

Timothy Horan – Oppenheimer & Co.

Simon Flannery – Morgan Stanley

Jonathan Chaplin – Credit Suisse

Ric Prentiss – Raymond James

David Dixon – FBR Capital Markets & Co.

James Ratcliffe – Barclays Capital

Presentation

Operator

Good morning. My name is Kerry and I will be your conference operator today. At this time, I would like to welcome everyone to the third quarter earnings conference call. All lines have been placed on mute to prevent any background noise. Thank you.

I’d now like to turn the call over to your Vice President of Investor Relations, Mr. Yijing Brentano. Please go ahead.

Yijing Brentano

Thank you, Kerry. Good morning and welcome to Sprint Nextel’s third 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.

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 Web site.

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 the risk factors in our SEC filings, which I encourage you to review, including our Form 10-K for the year ended December 31, 2009, and in Part II Item 1A risk factors of our quarterly reports on Form 10-Q.

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 third 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 Web site at www.sprint.com/investors.

Next, I would like to cover our EPS results. Basic and diluted loss per common share for the third quarter was $0.30 compared to $0.25 in the second quarter 2010 and $0.17 in the year ago period. The sequential change in EPS was due primarily to drivers that also impacted the sequential change in OIBDA, which Bob Brust will discuss in more detail later on the call.

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

Dan Hesse

Thank you, Yijing, and thank you to everyone on the call for joining us this morning.

If you’d turn to slide four, I was asked at an investor conference recently to describe Sprint’s performance in one word, and I chose the word ‘Momentum.’ Our last two quarters, the second and third quarters of 2010 represent the best quarters ever for Sprint, both in postpaid churn and in year-over-year improvement in postpaid net adds, driven by our best retail net add performance in over four years.

We grew total wireless subscribers by 644,000 in the third quarter, our highest quarterly net add total since 2006.

As is my habit, I’ll discuss our results in the context of Sprint’s three overarching priorities

The customer experience, the brand, and cash. But with a change of pace, let me start with the third, cash, primarily driven by more postpaid and prepaid gross adds and upgrades plus some anticipated seasonal factors, quarterly OIBDA was driven down sequentially to $1.34 billion.

Year-to-date free cash flow now stands at $1.6 billion, allowing us to maintain strong liquidity with cash and cash equivalents balance of $4.7 billion. Total net operating revenues increased sequentially and year-over-year.

Please go to slide #five, with respect to the customer experience, I am pleased to report that we’ve achieved our 11th consecutive quarter of improvement in customer care satisfaction and in first call resolution. Top-box satisfaction and bottom-box satisfaction both achieved all time bests, as did first call resolution.

Our networks achieved yet another all-time best result for fewest blocked calls. In a recent third-party survey, our customers gave Sprint our highest rating ever on network satisfaction.

According to the recent J.D. Power and Associates Wireless Call Quality Performance Study, Sprint came in first or second place in five of six regions, and we have shown the most improvement of any carrier over a three-year period.

In the J.D. Power Retail Sales Satisfaction Study, Sprint moved from last place in recent years to a virtual tie for first place. In the Vocalabs National Customer Service Survey, Sprint’s call satisfaction tied for first place.

On the business side, we won seven ATLANTIC-ACM Awards for Business Connectivity and Wireless Business Excellence, and Sprint again walked away with the top honors in the Nemertes 2010 PilotHouse Awards for MPLS Services, receiving the top overall score.

The customer experience improvements are reflected in our churn results. As mentioned, the last two quarters have been the best two churn quarters in our history. The percentage of postpaid customers that carry a prime credit rating remains at a strong 84%, an important determinant of involuntary churn.

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