Sprint.com

October 25, 2012

Sprint Nextel Reports Third Quarter 2012 Results

  • Sprint platform wireless service revenue growth of 14 percent year-over-year; eighth consecutive quarter of double digit percentage year-over-year growth
    • Nearly 900,000 Sprint platform net additions
    • Sprint platform postpaid ARPU growth of 5 percent year-over-year
  • Operating loss of $231 million, including accelerated depreciation of $397 million; Adjusted OIBDA* of $1.28 billion
  • Best ever third quarter for both Sprint platform postpaid churn of 1.88 percent and Sprint platform prepaid churn of 2.93 percent
  • Continued high postpaid Nextel recapture rate of 59 percent
  • Strong total iPhone sales of approximately 1.5 million – 40 percent to new customers
  • Network Vision deployment continues to gain momentum
    • 4G LTE now launched in 32 cities with over 115 more expected in coming months
    • Construction started in over 200 cities
    • Over 13,500 sites now ready for construction
    • Current construction starts per week have grown over 250 percent from second quarter
    • Nearly 4,300 sites on air

The company’s third 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: 83806887 or may listen via the Internet at www.sprint.com/investors.

OVERLAND PARK, Kan. (BUSINESS WIRE), October 25, 2012 - Sprint Nextel Corp. (NYSE: S) today reported wireless service revenues of nearly $7.3 billion during the quarter, an increase of nearly 6 percent year-over-year. Wireless service revenues for the Sprint platform grew 14 percent year-over-year driven by postpaid ARPU growth of $3.01 and continued subscriber growth.

The company reported a net loss of $767 million and a diluted net loss of $.26 per share for the third quarter of 2012 as compared to a net loss of $301 million and a diluted net loss of $.10 per share in the third quarter of 2011. Sprint’s third quarter 2012 results include accelerated depreciation of $397 million, or negative $.13 per share (pre-tax), primarily related to Network Vision, including the expected shutdown of the Nextel platform.

The Sprint platform postpaid subscriber base grew for the tenth consecutive quarter, with net additions of 410,000 driven by a postpaid Nextel recapture rate of 59 percent and best ever third quarter churn. Sprint recorded approximately 1.5 million iPhone® sales in the third quarter with 40 percent representing new customers. The company also surpassed 1 million LTE smartphones sold prior to the launch of iPhone 5.

“The Sprint platform performed well, with strong net subscriber additions, record third quarter postpaid and prepaid churn and robust revenue growth, contributing to Adjusted OIBDA* of $1.28 billion even as we continue to invest in Network Vision and position the company for future growth,” said Dan Hesse, Sprint CEO. “As a result, we believe we will slightly exceed the top of the range of our recently increased Adjusted OIBDA* forecast.”

NETWORK VISION HIGHLIGHTS

Sprint’s Network Vision initiative continues to gain momentum. The number of sites that are either ready for construction or already underway has more than doubled in the last three months to more than 13,500. Leasing and zoning have been completed on more than 20,000 sites. To date nearly 4,300 sites are on-air and meeting speed and coverage enhancement targets. Recent weekly construction starts are up over 250 percent from the second quarter. Sprint now expects to bring 12,000 sites on air approximately one quarter later than originally planned.

As part of Network Vision, Sprint has launched 4G LTE in 32 cities and expects that 4G LTE will be available in more than 115 additional cities in the coming months. Sprint has launched or announced 13 4G LTE devices to date. Sprint launched Motorola PHOTON™ Q 4G LTE and Samsung Galaxy Victory™ 4G LTE in addition to iPhone 5 in the third quarter. Earlier this month Sprint announced the upcoming availability of LG Optimus G™, LG Mach™, Samsung Galaxy Note® II and Samsung Galaxy Tab® 2 10.1.

In the third quarter, Sprint nearly surpassed 1.2 million Sprint® Direct Connect® push-to-talk devices sold, which contributed to the strong recapture rate of Nextel subscribers on the Sprint platform. The company has shut down power and disconnected backhaul to most of the 9,600 Nextel sites taken off air and is realizing the related savings. The Nextel platform shutdown remains on pace for the middle of 2013.

LIQUIDITY

During the third quarter, Sprint raised additional financing of $1.5 billion and retired $1.5 billion of debt maturities including $473 million of 2013 maturities and $1 billion of 2015 maturities. Sprint’s next scheduled debt maturities include $317 million due in 2013 and approximately $1.4 billion of total maturities in 2014. As of September 30, 2012, the company’s liquidity was approximately $7.5 billion consisting of $6.3 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 borrowed $77 million of available funding under the equipment financing credit facility, reducing the remaining undrawn availability to $923 million. Sprint generated $628 million of net cash provided by operating activities and negative Free Cash Flow* of $487 million in the quarter.

CUSTOMER EXPERIENCE AND BRAND HIGHLIGHTS

Third-party studies continue to confirm Sprint offers the industry’s best customer experience. Sprint earned J.D. Power and Associates’ top ranking – for the third straight time – for purchase experience among full-service wireless carriers. Sprint also received the Nemertes 2012 PilotHouse award for MPLS Services, beating all rivals in customer service. Sprint’s Virgin Mobile USA brand ranked highest in satisfaction for customer care with non-contract wireless service by J.D. Power and Associates. Sprint was also recognized for its innovative machine-to-machine (M2M) solutions in the transportation and home health care industries by Connected World Magazine and earlier this month was named to the magazine’s annual list of the 100 most important and influential providers of M2M services. For the fourth straight year, Newsweek’s annual Green Rankings has recognized Sprint as one of the greenest companies in the U.S., ranking the company third among the 500 largest publicly traded corporations. Sprint was also named the top U.S. wireless carrier on the 2012 Carbon Disclosure Project S&P 500 Climate Change Report for its leading carbon disclosure score and for the second consecutive year, the Dow Jones Sustainability Index named Sprint as a leader in sustainability.

Sprint launched a number of innovative products and services during the third quarter including Single Source Enablement, a turnkey set of wireless solutions and support enabling any business to become a wireless Mobile Virtual Network Operator (MVNO). Sprint also began offering Microsoft Office 365 to small and mid-sized businesses to bring organizations new ways to enhance productivity, reduce costs and collaborate with customers and partners while also extending the cloud-based communication tools to mobile workforces. In October, Sprint launched Pinsight Media+™, a new advertising service that gives advertisers the power to reach consumers on their mobile device in a more personalized way. Finally, the Samsung Galaxy family of devices was introduced to Sprint’s prepaid brand Virgin Mobile with Samsung Galaxy Reverb™ and Boost Mobile also launched the award-winning Samsung Galaxy S® II 4G.

CONSOLIDATED RESULTS

TABLE 1: Selected Consolidated Financial Data (Unaudited)                        
(Millions, except per share data)                        
    Quarter To Date   Year To Date
Financial Data     9/30/12       9/30/11    

% ?

    9/30/12       9/30/11    

% ?

                         
Net operating revenues   $ 8,763     $ 8,333     5 %   $ 26,340     $ 24,957     6 %
Operating (loss) income   $ (231 )   $ 208     NM     $ (1,115 )   $ 546     NM  
Adjusted OIBDA*   $ 1,279     $ 1,402     (9 ) %   $ 3,943     $ 4,230     (7 ) %
Adjusted OIBDA margin*     16.0 %     18.2 %         16.4 %     18.4 %    
Net loss (1)   $ (767 )   $ (301 )   NM     $ (3,004 )   $ (1,587 )   (89 ) %
Diluted net loss per common share (1)   $ (0.26 )   $ (0.10 )   NM     $ (1.00 )   $ (0.53 )   (89 ) %
                         
Capital expenditures (2)   $ 1,489     $ 760     96 %   $ 3,447     $ 1,955     76 %
Net cash provided by operating activities   $ 628     $ 608     3 %   $ 2,783     $ 2,602     7 %
Free Cash Flow*   $ (487 )   $ (273 )   78 %   $ (140 )   $ 172     NM  
  • Consolidated net operating revenues of $8.8 billion for the quarter were 5 percent higher than in the third quarter of 2011 and 1 percent lower than the second quarter of 2012. The quarterly year-over-year improvement was primarily due to higher wireless service and equipment revenues, partially offset by a reduction in wireline revenues. The decline sequentially was primarily due to lower wireline revenue.
  • Operating loss was $231 million compared to operating income of $208 million for the third quarter of 2011 and an operating loss of $629 million for the second quarter of 2012. The year-over-year change was driven by items identified below in Adjusted OIBDA* and by accelerated depreciation expense associated with the expected shutdown of the Nextel platform. In addition to the items identified in Adjusted OIBDA*, the sequential improvement in operating loss was driven by a reduction in depreciation expense as a result of Nextel platform assets that were fully depreciated during the second quarter of 2012 and lease exit costs recognized during the second quarter, each associated with the Nextel platform cell sites taken off air during the second quarter of 2012.
  • Adjusted OIBDA* was $1.28 billion for the quarter, compared to $1.40 billion for the third quarter of 2011 and $1.45 billion in the second quarter of 2012. The quarterly year-over-year decrease in Adjusted OIBDA* was primarily due to higher wireless equipment net subsidy and estimated Network Vision related expenses, partially offset by higher wireless service revenues and lower cost of service. Sequentially, Adjusted OIBDA* decreased primarily as a result of higher equipment net subsidy expense.
  • Capital expenditures(2), excluding capitalized interest of $52 million, were $1.5 billion in the quarter, compared to $760 million in the third quarter of 2011 and $1.2 billion in the second quarter of 2012. Wireless capital expenditures were $1.4 billion in the third quarter of 2012, compared to $647 million in the third quarter of 2011 and $1 billion in the second quarter of 2012. During the quarter, the company invested $1.1 billion for Network Vision and approximately $195 million in capacity related to both legacy network and Network Vision equipment. Wireline capital expenditures were $60 million in the third quarter of 2012, compared to $36 million in the third quarter of 2011 and $79 million in the second quarter of 2012. Corporate capital expenditures were $53 million in the third quarter of 2012, compared to $77 million in the third quarter of 2011 and $67 million in the second quarter of 2012, primarily related to IT infrastructure to support our Wireless and Wireline businesses.
  • Net cash provided by operating activities was $628 million for the quarter, compared to $608 million for the third quarter of 2011 and $1.2 billion for the second quarter of 2012.
  • Free Cash Flow* was negative $487 million for the quarter, compared to a negative $273 million for the third quarter of 2011 and $209 million for the second quarter of 2012.

WIRELESS RESULTS

Wireless Customers

  • The company served nearly 56 million customers at the end of the third quarter of 2012. This includes 32.1 million postpaid subscribers (29.8 million on the Sprint platform and 2.3 million on the Nextel platform), 15.4 million prepaid subscribers (14.6 million on the Sprint platform and 800,000 on the Nextel platform) and 8.4 million wholesale and affiliate subscribers, all of whom utilize the Sprint platform.
  • The Sprint platform added 410,000 net postpaid customers during the quarter. The Nextel platform lost 866,000 net postpaid customers in the quarter. Sprint platform postpaid net additions and Nextel platform postpaid net subscriber losses include 516,000 net subscribers from the Nextel platform acquired on the Sprint platform.
  • The company added 19,000 net prepaid subscribers during the quarter, which includes net additions of 459,000 prepaid Sprint platform customers, offset by net losses of 440,000 prepaid Nextel platform customers. Sprint platform prepaid net additions and Nextel platform prep

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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