Sprint Corp. is planning to rely more heavily on its wireless segment and Internet backbone to balance out its faltering long-distance business.
The company warned late last week its 2000 and 2001 earnings would be below Wall Street expectations, an announcement that followed similar but more drastic moves by fellow long-distance leaders AT&T Corp. and WorldCom Communications Inc.
Amid heavy trading, Sprint’s PCS shares slowly fell 22 percent Friday to $28.50 per share, down from $36.56 the previous day. Sprint’s FON group saw heavy trading in the morning, but leveled off in the afternoon to $23.87, up from $22.50 the previous day.
Sprint said its FON Group, which comprises its long-distance and data arm, would reach full-year earnings of $1.80 to $1.90 a share. Analysts had pegged the company’s earnings at $1.90 for that period.
Next year, Sprint said it expects earnings of $1.65 to $1.75 a share, which falls below a Wall Street expectation of $2.10.
Sprint’s announcement comes after months of sliding profits for major long-distance companies. To combat the downturn, AT&T and WorldCom both announced plans to split up their companies into various segments.
William Esrey, Sprint’s chief executive, said the Kansas City, Mo.-based carrier would take a more moderate approach and focus more heavily on its personal communications services and Internet segments to turn up slipping profits.
“Over the next three years, telecommunications industry revenues are expected to grow by more than a third,” Esrey said Friday during the company’s annual investment meeting in New York. “This growth will be driven in large part by wireless communications and Internet-related services. When you match those growth characteristics to Sprint’s key assets-our 100-percent digital PCS network, tier-one Internet backbone, national long-distance fiber-optic backbone and local telephone operations with superior growth demographics-it’s clear that Sprint has a compelling industry position.”
Today 70 percent of the company’s long-distance business is voice and 30 percent is data, while local operations are 90-percent voice. By 2003, Sprint said it will shift the balance to create an equal mix between voice and data.
Sprint expects these changes will allow a 40- to 50-percent increase in the FON group by 2003 compared to this year, bringing shares to $2.68.
The company’s forecast for its PCS group was in line with its hopes for the industry. The company said the group’s revenues would grow 90 percent this year, 50 percent next year and about 30 percent in 2002.
By the year’s end, Sprint said it expects to have about 10 percent of its customers using its wireless Web service. In five years, the company expects that number to increase to 60 percent.
“Our goal is straightforward-deliver superior shareholder returns. To achieve this we must continue to build PCS into a wireless powerhouse and transition FON Group into a high-growth, data-driven business,” Esrey said. “The real key, as always, is execution.”
