Sprint Corp. announced April 20 first-quarter consolidated revenues of $4.72 billion, a 16-percent increase from the $4.08 billion posted for the same period of 1998. The next day Sprint said it awarded Lucent Technologies Inc. a $780 million equipment contract.
Kansas City, Mo.-based Sprint is divided into Sprint FON Group, which comprises core wireline operations, and Sprint PCS Group, which consists of its wireless personal communications services operations.
Sprint PCS posted revenues of $604.2 million, nearly triple the $203.3 million it earned during the first quarter of 1998. However, its net losses for the latest complete quarter were $625.5 million vs. $145.2 million for the year-ago quarter.
Compared with its 97-cent loss per share during the first quarter of last year, Sprint PCS recorded a loss during the latest complete quarter of $1.46 per share, including 5 cents per share “related to early extinguishment of debt.” Sprint Corp. characterized the Sprint PCS per-share losses during the first quarter of this year as “within company expectations.”
Following Sprint Corp.’s quarterly earnings release, Standard & Poor’s Corp., a New York-based debt rating agency, announced it had lowered to BBB+ from A- its rating on Sprint Corp., Sprint Capital Corp., Sprint Spectrum L.P., Centel Corp. and Centel Capital Corp. In S&P’s rating criteria, BBB+ is at the top of a category that also includes ratings of BBB and BBB-. The BBB category is the lowest investment-grade ranking, below which debt drops are in the speculative-grade category, also known as high yield or junk bonds.
“The rating action reflects the amount of additional debt financing expected over the next two years to support higher than previously anticipated PCS subscriber growth and fixed wireless investments,” Rosemarie Kalinowski, a telecommunications analyst for S&P, said in her ratings analysis.
Sprint Corp. said Sprint PCS added 763,000 new customers during the first quarter of 1999, including about 20,000 acquired through its purchase of the PrimeCo Personal Communications L.P. Hawaii market. Sprint PCS closed the latest quarter with 3.35 million customers, of which 1.7 million were added during 1998.
Kalinowski said Sprint PCS has “experienced the fastest subscriber growth in the U.S. wireless industry …(and its) average revenue per unit per month is in the $50 range, higher than average for the wireless industry due to the company targeting high-end users.”
During the last quarter, Sprint Corp. said it spent $592 million on capital expenditures to expand the Sprint PCS network. The company also announced April 21 it had awarded Lucent a new three-year contract valued at least $780 million to supply equipment and services for the next phase of Sprint PCS’ nationwide wireless network development. Prior to this, Sprint had contracted with Lucent for $2.5 billion in infrastructure supply contracts.
“The higher-than-expected growth has resulted in increased cash requirements related to network buildout and customer acquisition costs, (but) PCS operations are expected to break even on a cash flow basis in 2001,” Kalinowski said.
Sprint Corp. also has invested recently in fixed wireless spectrum to provide a last-mile solution and to complement its Integrated On-Demand Network, “its transition to a packet-switched network enabling the delivery of data, video and voice services at a lower cost,” she said. The company expects to build out its On-Demand Network over the next three years.
“Sprint Corp.’s consolidated cash requirements are anticipated to be significantly higher in 1999 and 2000 compared to 1998 due to the growth in PCS, as well as growth in its core businesses, its Integrated On-Demand Network deployment and new investments in fixed wireless,” Kalinowski said.
As a result, in addition to downgrading the debt of Sprint Corp., Standard & Poor’s also placed a negative outlook on all Sprint entities, meaning that further ratings downgrades are possible.
Sprint Corp. also announced April 20 a two-for-one stock split of its Sprint FON stock.
“The (new) Sprint FON shares reflect the performance of Sprint’s wireline telecommunications operations (and) also … activities related to development of Sprint ION and other ventures, consisting mainly of Sprint’s investment in Global One, a partnership with France Telecom and Deutsche Telekom,” the company said.
