Sprint Nextel records massive loss on Nextel write-down: T-Mobile USA, Leap add customers

Sprint Nextel Corp.’s stock plummeted to new lows after the company reported a $29.5 billion loss in the fourth quarter due to a write down of the value of Nextel Communications Inc., which Sprint Corp. acquired in 2005. Sprint Nextel’s stock was down 10.4% to $8.02 on news of its financials.
The No. 3 carrier’s coveted postpaid customers continued to leave in droves as well. The company previously reported it had lost 683,000 subscribers in the fourth quarter and warned analysts it expects to lose another 1.2 million customers in the current quarter. Prepaid and wholesale channels are the only areas where the company is experiencing growth. Sprint Nextel ended 2007 with 53.8 million subscribers on its network, representing a net gain of 700,000 customers on the year. The growth was due to a gain of 1.9 million prepaid and wholesale customers, which offset the massive exodus on the postpaid side of the business.
Prepaid growth was scant at best. The company added 257,000 prepaid customers through the recent launch of an unlimited calling plan by its Boost Mobile affiliate in the quarter, yet lost 202,000 traditional Boost prepaid customers. Wholesale channels added 500,000 customers in the quarter.
The smaller base of postpaid users cut into Sprint Nextel’s average revenue per user (ARPU) as well. Postpaid ARPU hit $58 during the quarter, which is down from $59 in the third quarter and more than $60 in the fourth quarter in 2006. Data revenues continued to grow, though, with more than $11 in data ARPU during the quarter. Prepaid ARPU was down to less than $28, from $30 in the third quarter and almost $32 in the year-ago period.
Postpaid churn hit 2.3% in the quarter, which reflected no change from the previous quarter, the company said. Prepaid churn from Boost Mobile reached 7.5%, a significant jump from the 6.2% rate reported in the previous quarter and 6.5% in the fourth quarter of 2006.
In the quarter, the company recorded an impairment charge of $29.7 billion on its Nextel business, which resulted in a $29.5 billion loss on the quarter. The carrier recorded a net income of $261 million in the year-ago period.
T-Mobile USA
Separately, T-Mobile USA Inc. ended 2007 with 28.7 million customers after adding 951,000 customers and posting a net income of $383 million during the fourth quarter.
The carrier netted more than 3.6 million new customers during 2007, with 83% of its total customer base coming from postpaid subscribers at the year’s close.
Customer churn dropped to 2.8% overall in the fourth quarter, from 2.9% in the third quarter and the year-ago period. Average revenue per user (ARPU) remained unchanged from the fourth quarter of 2006 at $52, but was down from the $53 it reported in the previous quarter.
Leap
Leap Wireless International Inc.’s stock was up nearly 12% to $41.92 after it reported a net loss of $18.1 million in the fourth quarter, bringing its total annual losses to $75.9 million. The flat-rate, all-you-can-eat carrier ended the year with 2.86 million customers after netting 152,000 new customers during the quarter.
The company’s loss on the quarter was down more than 60% from the year-ago loss of $45.6 million. Meanwhile, overall annual losses were up more than 211% from $24.4 million.
Net customer additions were down 42% in the quarter from 262,457 during the final three months of 2006 to 152,072 in 2007, while annual net customer adds were up 7% from 592,237 in 2006 to 633,693 last year.
Churn jumped to 4.2% in the quarter from 4.1% in the previous quarter while the carrier ended the year with an average churn rate of 4.3%, up from 3.9% in 2006. (ARPU) was up to $45.57 in the quarter from $43.63 in the year-ago period. Annual ARPU overall was up to $44.92 in 2007 from $42.81 the year prior.
“We expect to add our three millionth customer today and believe the business is well positioned for the future,” President, CEO and acting CFO Doug Hutcheson said.