Sprint.com

February 08, 2012

Sprint Nextel Reports Fourth Quarter and Full Year 2011 Results

  • Quarterly year-over-year Sprint platform postpaid ARPU growth of $3.69 is the best on record in the industry
  • Largest sequential increase in net operating revenues in more than five years
  • Sprint serves more than 55 million customers – highest level ever
    • 1.6 million total net subscriber additions in the quarter – best since 2005
    • 539,000 postpaid net additions on the Sprint platform in the quarter
  • Strong iPhone sales – 40 percent to new customers
  • Network Vision on schedule and on budget; six major cities to launch 4G LTE by mid-year with the addition of Kansas City and Baltimore
  • Adjusted OIBDA* of $842 million and the first year of Operating Income since 2006

The company’s fourth quarter 2011 earnings conference call will be held at 8 a.m. ET today. Participants may dial 800-938-1120 in the U.S. or Canada (706-634-7849 internationally) and provide the following ID: 40556064 or may listen via the Internet at www.sprint.com/investor.

OVERLAND PARK, Kan. (BUSINESS WIRE), February 08, 2012 - Sprint Nextel Corp. (NYSE: S) today reported Adjusted OIBDA* of $842 million for the fourth quarter and nearly $5.1 billion for the full year 2011. Wireless service revenues for the fourth quarter increased more than 7 percent year-over-year, driven by Sprint platform postpaid ARPU growth of $3.69 – the largest year-over-year increase on record across the U.S. wireless industry. Strong revenue growth and cost management partially offset the impact of increased equipment net subsidies and sales expense associated with the successful launch of the iPhone®. Forty percent of Sprint’s 1.8 million iPhone sales in the fourth quarter were to new customers. Based on internal estimates, including incremental costs associated with iPhone sales, the combined impact of iPhone and Network Vision costs reduced fourth quarter Adjusted OIBDA* margin, which was 10.8 percent, by approximately 8.8 percentage points.

The company reported total net subscriber additions of 1.6 million during the fourth quarter of 2011 – the best quarterly result in six years – bringing total ending subscribers to the highest level in the company’s history. Total postpaid net additions of 161,000 for the fourth quarter represent the tenth consecutive quarter of year-over-year improvement and were driven by continued strength of the Sprint platform, which had net postpaid additions of 539,000. This is the seventh consecutive quarter of net postpaid subscriber growth on the Sprint platform.

“Our strong fourth quarter performance illustrates the power of matching iconic devices like the iPhone with our simple, unlimited plans and industry-leading customer experience,” said Dan Hesse, Sprint CEO. “During the past year, Sprint added more than 5 million net new customers and grew wireless service revenue by more than 5 percent, including 17 percent for the Sprint platform. This momentum gives us confidence as we execute our Network Vision upgrade and 4G LTE roll-out.”

The company continued to rapidly grow the number of prepaid and wholesale and affiliate subscribers in the fourth quarter. Prepaid net additions were 507,000 bringing total prepaid subscribers to nearly 14.8 million at the end of 2011, an increase of 20 percent since the end of 2010. Net additions of 954,000 for wholesale and affiliates in the fourth quarter were the highest in seven years.

Additionally, the company reported a net loss of $1.3 billion and a diluted loss of $.43 per share for the quarter, which includes pre-tax, non-cash charges of $241 million, or $.08 per share, consisting of asset and impairment charges of $78 million on property, plant and equipment, $135 million on Sprint’s investment in Clearwire and $28 million in severance costs.

Sprint’s Network Vision initiative remains on schedule and on budget. In the fourth quarter, the company completed field integration testing and launched the first multi-mode base station and first cluster of cell sites, validating improved 3G data performance metrics, such as voice quality, call drops and blocks and improved data speeds. The company expects to bring approximately 12,000 sites on air by the end of 2012 and to complete the majority of its Network Vision roll-out in 2013. In addition, as part of Network Vision Sprint has announced it expects to begin launching 4G LTE by mid-year 2012. In addition to Houston, Dallas, San Antonio and Atlanta, Sprint today announced Kansas City and Baltimore will be among the initial six major cities to launch.

The company also raised a substantial portion of the additional cash needed to fund the Network Vision deployment, debt maturities and working capital requirements over the next few years. During the fourth quarter, Sprint raised additional financing of $4 billion and repaid all 2012 maturities prior to scheduled maturity. Sprint’s next scheduled debt maturities include $300 million due in May 2013 and $1.5 billion due in October 2013.

Sprint generated $257 million of Free Cash Flow* in the quarter. As of Dec. 31, 2011, the company’s total liquidity was approximately $6.7 billion, consisting of $5.6 billion in cash, cash equivalents and short-term investments and $1.1 billion of undrawn borrowing capacity available under its revolving bank credit facility.

In 2011, Sprint’s Customer Satisfaction and First Call Resolution scores improved year-over-year for the fourth consecutive year and third parties continued to affirm Sprint’s customer experience leadership. In the fourth quarter, Frost & Sullivan awarded Sprint the North American Customer Value Enhancement of the Year Award in the Machine-to-Machine (M2M) Communications market, and Analysys Mason gave Sprint the highest M2M scorecard ranking among North American-based communications service providers. Last month, Sprint received the ATLANTIC ACM Best-in-Class Network Award for Global Wholesale Excellence. Kiplinger’s Personal Finance Magazine’s annual 2011 Best of Everything list awarded top honors to Sprint’s unlimited data plan, no annual contract offerings from Boost Mobile and payLo by Virgin Mobile. Last week, Virgin Mobile USA received the highest ranking in the J.D. Power and Associates 2012 Wireless Customer Care Non-Contract Study – Volume 1, with Boost placing second. Sprint’s sustainable efforts also continued to gather accolades. Following Sprint’s third place ranking among U.S. companies on Newsweek’s 2011 Green Rankings in October, Sprint joined the exclusive World Wildlife Fund’s Climate Savers Program – one of only 27 global partners selected since 1999.

Besides adding the iPhone 4 and iPhone 4s to the company’s industry-leading line-up of devices, Sprint also launched several other innovative products during the fourth quarter including HTC EVO Design 4G™, the company’s 25th 4G device. Sprint also launched the first three Sprint Direct Connect® phones, Kyocera DuraMax, Kyocera DuraCore and Motorola Admiral™, the first Sprint Direct Connect Android™ smartphone. Earlier this year, Sprint announced the initial group of devices that will operate on its 4G LTE network: Galaxy Nexus™, LG Viper™ 4G LTE with eco-friendly features and Sierra Wireless™ Tri-Network Hotspot. Also during the fourth quarter, Sprint unveiled a redesigned website for business, www.sprint.com/business, launched 4G Fixed Business Access, a business solution that turns any area into an instant office, and collaborated on M2M solutions including wireless kiosks to capture health and wellness information remotely.

CONSOLIDATED RESULTS

TABLE NO. 1 Selected Unaudited Financial Data (dollars in millions, except per share data)
    Quarter To Date       Year To Date    
Financial Data   December 31,
2011
  December 31,
2010
 

%
?

  December 31,
2011
  December 31,
2010
 

%
?

                         
Net operating revenues   $ 8,722     $ 8,301     5 %   $ 33,679     $ 32,563     3 %
Adjusted OIBDA*   $ 842     $ 1,315     (36

)%

  $ 5,072     $ 5,633     (10

)%

Adjusted OIBDA margin*     10.8 %     17.6 %         16.5 %     18.9 %    
Operating (loss) income   $ (438 )   $ (139 )   NM     $ 108     $ (595 )   NM  
Net loss (1)   $ (1,303 )   $ (929 )   (40

)%

  $ (2,890 )   $ (3,465 )   17 %
Diluted loss per common share (1)   $ (0.43 )   $ (0.31 )   (39

)%

  $ (0.96 )   $ (1.16 )   17 %
                         
Capital Expenditures (2)   $ 900     $ 608     48 %   $ 2,855     $ 1,926     48 %
                         
Free Cash Flow*   $ 257     $ 913     (72

)%

  $ 429     $ 2,512     (83

)%

 
  • Consolidated net operating revenues of $8.7 billion for the quarter were 5 percent higher than in the fourth quarter of 2010 and the third quarter of 2011. The quarterly year-over-year and sequential improvements were primarily due to higher wireless service and equipment revenue offset by a reduction in wireline revenue.
  • Adjusted OIBDA* was $842 million for the quarter, compared to $1.3 billion for the fourth quarter of 2010 and $1.4 billion in the third quarter of 2011. The quarterly year-over-year decline in Adjusted OIBDA* was primarily due to higher equipment net subsidy and sales expense, higher wireless cost of service and lower wireline revenues, partially offset by higher postpaid and prepaid wireless service revenues. Sequentially, quarterly Adjusted OIBDA* declined primarily as a result of higher equipment net subsidy and sales expense, partially offset by higher postpaid wireless service revenues and lower wireless cost of service. Based on internal estimates, including incremental costs associated with iPhone sales, the combined impact of iPhone and Network Vision costs reduced fourth quarter Adjusted OIBDA* of $842 million by approximately $684 million.
  • Capital expenditures(2), excluding capitalized interest of $109 million, were $900 million in the quarter, compared to $608 million in the fourth quarter of 2010 and $760 million in the third quarter of 2011. Wireless capital expenditures were $774 million in the fourth quarter of 2011, compared to $473 million in the fourth quarter of 2010 and $647 million in the third quarter of 2011. During the quarter, the company invested in data capacity as well as approximately $370 million for our Network Vision plan. Wireline capital expenditures were $34 million in the fourth quarter of 2011, compared to $67 million in the fourth quarter of 2010 and $36 million in the third quarter of 2011. Corporate capital expenditures were $92 million in the fourth quarter of 2011, compared to $68 million in the fourth quarter of 2010 and $77 million in the third quarter of 2011, primarily related to IT infrastructure to support our Wireless and Wireline businesses.
  • Free Cash Flow* was $257 million for the quarter, compared to $913 million for the fourth quarter of 2010 and negative $273 million for the third quarter of 2011. Free Cash Flow* was reduced on a year-over-year basis primarily due to a reduction in cash flows from operations and higher capital expenditures offset by a one-time reimbursement of $135 million related to FCC licenses. Sequentially, quarterly Free Cash Flow* improved primarily as a result of favorable working capital changes and a one-time reimbursement of $135 million related to FCC licenses.

WIRELESS RESULTS

Wireless Customers

  • The company served more than 55 million customers at the end of the fourth quarter of 2011. This includes 33 million postpaid subscribers (28.7 million on the Sprint platform and 4.3 million on the Nextel platform), 14.8 million prepaid subscribers (12.8 million on the Sprint platform and 2 million on the Nextel platform) and approximately 7.2 million wholesale and affiliate subscribers, all of whom utilize the Sprint platform.
  • For the quarter, the company added 1.6 million net wireless customers, including net additions of 668,000 retail subscribers and net additions of 954,000 wholesale and affiliate subscribers as a result of growth in MVNOs reselling prepaid services.
  • The company gained approximately 161,000 net postpaid subscribers during the quarter compared to a gain of 58,000 in the fourth quarter of 2010.
  • The Sprint platform added approximately 539,000 net postpaid customers during the quarter. The Nextel platform lost 378,000 net postpaid customers in the quarter.
  • The company added 507,000 net prepaid subscribers during the quarter, which includes net additions of 899,000 prepaid Sprint platform customers, offset by losses of 392,000 net prepaid Nextel platform customers.
  • The credit quality of Sprint’s end-of-period postpaid customers was approximately 82 percent prime as compared to approximately 83 percent prime at the end of the third quarter of 2011.

Wireless Churn

  • For the quarter, Sprint reported postpaid churn of 1.98 percent, compared to 1.86 percent for the year-ago period and 1.91 percent for the third quarter of 2011. Quarterly postpaid churn increased year-over-year and sequentially due to higher involuntary deactivations which occur when Sprint disconnects a customer due to lack of payment or violations of terms and conditions. This is a temporary increase, the majority of which was associated with pricing actions taken primarily through indirect channels. We tightened our credit standards during the third and fourth quarters to stem further impacts of these types of promotional activities.
  • Approximately 9 percent of postpaid customers upgraded their handsets during the fourth quarter. Upgrades as a percentage of our subscriber base increased sequentially, likely due to the iPhone launch and customers’ expectations of the launch, which depressed third quarter upgrades.
  • Prepaid churn for the fourth quarter was 3.68 percent, compared to 4.93 percent for the year-ago period and 4.07 percent for the third quarter of 2011. The quarterly year-over-year and sequential

Contact(s):

Sprint Nextel Corp.
Media Relations
Scott Sloat, 240-855-0164
scott.sloat@sprint.com
OR
Investor Relations
Brad Hampton, 800-259-3755
investor.relations@sprint.com


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