Sprint.com

July 26, 2012

Sprint Nextel Reports Second Quarter 2012 Results and Updates Full Year Forecast

  • Best ever Sprint platform postpaid ARPU of $63.38 drives Sprint platform wireless service revenue growth of 16 percent year-over-year
  • Best ever Sprint platform postpaid churn of 1.69 percent
  • Continued strong iPhone sales of nearly 1.5 million – 40 percent to new postpaid customers
  • Network Vision deployment continues on track
    • Launched 4G LTE in five major markets and 15 cities on July 15
    • Continue to expect 12,000 sites on air by the end of 2012
    • Shutdown of 9,600 Nextel sites now complete
    • 60 percent of postpaid subscribers leaving Nextel platform recaptured on Sprint platform
  • Operating loss of $629 million; Adjusted OIBDA* of $1.45 billion increases 10 percent year-over-year and includes Network Vision and iPhone dilution
    • Year-over-year increase in Adjusted OIBDA* is the highest in more than five years
    • Sequential quarterly increase in Adjusted OIBDA* of 20 percent
  • 2012 Adjusted OIBDA* forecast increased to between $4.5 billion and $4.6 billion

The company’s second quarter 2012 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: 83798759 or may listen via the Internet at www.sprint.com/investors.

 

OVERLAND PARK, Kan. (BUSINESS WIRE), July 26, 2012 - Sprint Nextel Corp. (NYSE: S) today reported a net loss of $1.4 billion and a diluted net loss of $.46 per share for the second quarter of 2012 as compared to a net loss of $847 million and a diluted net loss of $.28 per share in the second quarter of 2011. Sprint’s second quarter 2012 results include accelerated depreciation of $782 million, or negative $.26 per share (pre-tax), primarily related to Network Vision, including the expected shutdown of the Nextel platform; $184 million, or negative $.06 per share (pre-tax), for the recognition of lease exit costs for the remaining lease obligations associated with certain Nextel sites shut down; and an impairment of $204 million, or negative $.07 per share (pre-tax), related to Sprint’s investment in Clearwire.

The company reported wireless service revenues of $7.3 billion during the quarter, an increase of more than 8 percent year-over-year, driven primarily by Sprint platform postpaid ARPU growth of $4.31 – the largest quarterly year-over-year increase on record for the U.S. wireless industry.

Sprint platform postpaid net additions of 442,000 improved by 68 percent sequentially driven by best ever quarterly churn performance of 1.69 percent, a Nextel postpaid recapture rate of 60 percent and the continued strength of iPhone® sales. Sprint recorded nearly 1.5 million iPhone sales in the second quarter with 40 percent going to new postpaid customers.

“The Sprint platform achieved best ever postpaid ARPU and customer churn that, combined with disciplined customer acquisition and cost management, contributed to our Adjusted OIBDA* of $1.45 billion,” said Dan Hesse, Sprint CEO. “Based on this performance, we are raising the 2012 Adjusted OIBDA* forecast to between $4.5 billion and $4.6 billion.”

NETWORK VISION HIGHLIGHTS

Sprint’s Network Vision initiative remains on track. The company has taken 9,600 Nextel sites off air to date – earlier than previous guidance. To date, the company has completed leasing agreements for more than 12,700 Network Vision sites and zoning requirements are completed for nearly 13,900 sites. In addition, nearly 6,300 sites are either ready for construction or already underway and more than 2,000 sites are on air and meeting speed and coverage enhancement targets. Sprint expects to bring 12,000 sites on air by the end of 2012 and to complete the majority of its Network Vision roll-out by the end of 2013.

As part of Network Vision, Sprint launched 4G LTE in five major markets and 15 cities on July 15 including Houston, Dallas, San Antonio, Atlanta and Kansas City. Sprint launched its first four 4G LTE smartphones during the second quarter – Galaxy Nexus™, LG Viper™ 4G LTE, HTC EVO 4G LTE™ and Samsung Galaxy S® III. Sprint also significantly expanded the coverage area of its Sprint Direct Connect push-to-talk service with the addition of roaming and Sprint 1xRTT coverage areas.

LIQUIDITY

During the second quarter, Sprint entered into a new $1 billion secured credit facility contingent on equipment-related purchases from Ericsson for Network Vision with a cost of funding of approximately 6 percent based on expected drawdowns. This followed debt offerings of $2 billion raised in the first quarter of 2012 and $4 billion raised in the fourth quarter of 2011 to help fund the Network Vision deployment, debt maturities and working capital requirements. The company also retired $1 billion of 2013 debt maturities during the quarter. Sprint’s next scheduled debt maturities include $300 million due in May 2013 and $473 million due in October 2013. As of June 30, 2012, the company’s liquidity was approximately $8 billion consisting of $6.8 billion in cash, cash equivalents and short-term investments and $1.2 billion of undrawn borrowing capacity available under its revolving bank credit facility. Additionally, the company had $1 billion of undrawn availability under the equipment financing credit facility. Sprint generated $1.2 billion of net cash provided by operating activities and $209 million of Free Cash Flow* in the quarter.

CUSTOMER EXPERIENCE AND BRAND HIGHLIGHTS

Sprint’s leading customer experience continued to garner third-party accolades. In particular, the American Customer Satisfaction Index ranked Sprint number one among all national carriers in customer satisfaction and most improved, across all 47 industries, over the last four years. Sprint is the only U.S. company to go from last place to first place in its industry during this time. Sprint was the only telecom provider ranked in the top 50 by the Environmental Protection Agency Green Power Partners Fortune 500 list and for the third consecutive year Sprint won the International Electronics Recycling Conference and Expo Sustainability Leadership Award.

In addition to the new 4G LTE device launches, Sprint continued to strengthen its portfolio of products and services during the second quarter. Sprint’s Virgin Mobile USA brand began offering the iPhone to prepaid customers. Virgin Mobile also launched HTC EVO™ V 4G and Boost Mobile launched HTC EVO Design 4G™ bringing the combination of 4G WiMax and the award-winning EVO family of devices to prepaid customers. Sprint also announced Sprint Wholesale Cloud Services, a unique combination of platform services, a full suite of enablement applications and one-on-one support for wireless resellers. Additionally, earlier this month Sprint announced an exclusive relationship with CSC to deliver cloud computing, cloud-based email, managed hosting and co-location services in the U.S. to commercial customers. The company also introduced Sprint Guardian, a collection of mobile safety and device security bundles that provide families relevant tools to help stay safe and secure.

CONSOLIDATED RESULTS

TABLE NO. 1 Selected Consolidated Financial Data (Unaudited) (dollars in millions, except per share data)
      Quarter To Date     Year To Date    
      June 30,   June 30,   %   June 30,   June 30,   %
Financial Data   2012   2011  

?

  2012   2011  

?

                           
  Net operating revenues   $ 8,843     $ 8,311     6 %   $ 17,577     $ 16,624     6 %
  Operating (loss) income   $ (629 )   $ 79     NM     $ (884 )   $ 338     NM  
  Adjusted OIBDA*   $ 1,451     $ 1,314     10 %   $ 2,664     $ 2,828     (6 ) %
  Adjusted OIBDA margin*     17.9 %     17.2 %         16.6 %     18.6 %    
  Net loss (1)   $ (1,374 )   $ (847 )   (62 ) %   $ (2,237 )   $ (1,286 )   (74 ) %
  Diluted net loss per common share (1)   $ (0.46 )   $ (0.28 )   (64 ) %   $ (0.75 )   $ (0.43 )   (74 ) %
                           
  Capital expenditures (2)   $ 1,158     $ 640     81 %   $ 1,958     $ 1,195     64 %
  Net cash provided by operating activities   $ 1,177     $ 1,075     9 %   $ 2,155     $ 1,994     8 %
  Free Cash Flow*   $ 209     $ 267     (22 ) %   $ 347     $ 445     (22 ) %
                                               
  • Consolidated net operating revenues of $8.8 billion for the quarter were 6 percent higher than in the second quarter of 2011 and 1 percent higher than the first quarter of 2012. The quarterly year-over-year improvement was primarily due to higher wireless service revenues, partially offset by a reduction in wireline revenues. Revenue grew sequentially primarily due to higher Sprint platform wireless service revenues.
  • Operating loss was $629 million compared to operating income of $79 million for the second quarter of 2011 and an operating loss of $255 million for the first quarter of 2012. The quarterly year-over-year and sequential impacts to operating loss were driven by items identified below in Adjusted OIBDA* coupled with a second quarter 2012 increase in depreciation expense resulting primarily from accelerated depreciation related to the expected shut down of the Nextel network. Additionally, quarterly operating loss was increased by the recognition of lease exit expenses associated with the remaining lease obligations related to certain Nextel cell sites taken off air in the second quarter. Sequentially, the change in operating loss was due to a one-time net gain in the first quarter of 2012 associated with the termination of our spectrum hosting contract.
  • Adjusted OIBDA* was $1.45 billion for the quarter, compared to $1.3 billion for the second quarter of 2011 and $1.2 billion in the first quarter of 2012. The quarterly year-over-year increase in Adjusted OIBDA* was primarily due to higher postpaid and prepaid wireless service revenues, partially offset by an increase in equipment net subsidy and lower wireline revenues. Sequentially, Adjusted OIBDA* increased primarily as a result of higher wireless service revenues and lower equipment net subsidy expense primarily associated with fewer handset sales.
  • Capital expenditures(2), excluding capitalized interest of $102 million, were $1.2 billion in the quarter, compared to $640 million in the second quarter of 2011 and $800 million in the first quarter of 2012. Wireless capital expenditures were $1 billion in the second quarter of 2012, compared to $546 million in the second quarter of 2011 and $710 million in the first quarter of 2012. During the quarter, the company invested $704 million for Network Vision and approximately $230 million in data capacity related to both legacy network and Network Vision equipment. Wireline capital expenditures were $79 million in the second quarter of 2012, compared to $35 million in the second quarter of 2011 and $45 million in the first quarter of 2012. Corporate capital expenditures were $67 million in the second quarter of 2012, compared to $59 million in the second quarter of 2011 and $45 million in the first quarter of 2012, primarily related to IT infrastructure to support our Wireless and Wireline businesses.
  • Net cash provided by operating activities was $1.2 billion for the quarter, compared to $1.1 billion for the second quarter of 2011 and $978 million for the first quarter of 2012.
  • Free Cash Flow* was $209 million for the quarter, compared to $267 million for the second quarter of 2011 and $138 million for the first quarter of 2012.

WIRELESS RESULTS

Wireless Customers

  • The company served more than 56 million customers at the end of the second quarter of 2012. This includes nearly 32.6 million postpaid subscribers (29.4 million on the Sprint platform and 3.1 million on the Nextel platform), 15.4 million prepaid subscribers (14.1 million

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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